Determining a reasonable
alimony amount can be quite a challenge for divorcing spouses and lawyers alike.
But due to the new tax law, however, it will be even tougher due to the
Tax Cuts and Jobs Act.
One provision scraps a 75-year-old tax deduction for alimony payments.
The alimony deduction repeal would affect
divorces carried out after December 31, 2018.
Under current law, alimony payments are tax-free for the paying spouse,
and they’re taxed like regular income for the recipient. Since the
latter typically makes less money, it keeps more money in the family unit
and away from the federal government. Divorce attorneys use the current
tax deduction as a way to reach a settlement easier since there was more
money in the pot to divide amongst both parties.
By 2019, the spouse paying alimony cannot deduct it, and the spouse receiving
the money no longer has to pay taxes on it. The IRS claims that 600,000
Americans claimed an alimony deduction on their 2015 tax returns.
Eliminating the deduction means less money to go around, which can make
reaching a settlement much more difficult—meaning more litigation
and more money in terms of legal fees. Furthermore, the consequences can
also affect how property is divided and how child support is calculated.
Couples working on prenuptial—and postnuptial—agreements should
consider the tax law changes, since they contain clauses that typically
been drafted assuming the tax deduction will be in place.
If you are interested in filing for divorce in Southern California, our
Riverside divorce lawyer at
Hanson, Gorian, Bradford & Hanich are committed to helping you obtain the most favorable outcome in your
divorce settlement. With more than 50 years of collective legal experience,
we possess the necessary skill and history of success to find your solution.
Contact us and request a
free consultation today.