If you are going through the divorce process, timing may be an important factor for your pocketbook. New tax laws concerning divorce have been recently enacted. Read on to learn how these new laws could impact you.
Alimony tax laws will undergo noteworthy changes on January 1, 2019. Under present codes, alimony is deductible for the payer and taxable to the receiver. This means fewer taxes as a whole for families because the receiver has a lower tax rate than the payer’s deductible.
In contrast, the new 2019 law will result in alimony no longer acting as a payer’s deductible or a receiver’s tax. This may seem like a positive change for the receiver but this change will likely mean a lesser amount of alimony for the receiver. The government is projected to also take a $6.9 billion loss over the next decade, meaning less money in the pockets of divorcees.
Thus, it may be fruitful to finalize now in 2018 as the old law is still in effect. You may even choose to change your agreement later on as you would still retain the effect of the old laws as long as there is no express statement in the agreement that applies the 2019 laws.
Additionally you may want to review your pre-nuptial or post-nuptial agreement, if you have one, in light of the 2019 laws. The new tax codes may negate some of the already agreed on points. Items concerning alimony are likely to viewed as deductible, so ensure that your attorney reviews your agreement in light of the new laws and perhaps even re-negotiate the terms.