ARTICLE 1 – NEW TAX LAW IMPACT ON ALIMONY
On January 1, 2019, many new tax laws will go into effect. These laws will have a direct impact on divorcing couples. There appears to be four (4) major areas where the tax laws will change which every divorcing person needs to be aware of before moving forward with their divorce proceedings. These changes are to alimony, the marital home, child related tax credits and prenuptial/post-nuptial agreements. We will cover the alimony discussion in this blog and will address the other related tax issues in this series.
First, beginning in January 2019, alimony, which was previously a deductible expense by the payor, and income to the recipient, will no longer be handled in the same manner. Beginning with any Decree of Dissolution of Marriage entered after January 1, 2019, where alimony is awarded to a party, the party receiving the alimony will no longer be required to claim the alimony as income and the person paying the alimony will no longer be eligible to deduct the alimony from his/her income. It should be noted that if you had a Decree of Dissolution of Marriage entered prior to January 1, 2019, alimony is still treated as it was in the past regardless of the new law. If, however, either party modifies the Decree of Dissolution after 2019, it is unclear whether the past deductibility of the alimony will be maintained. The IRS has not specifically given guidance on this issue yet. It is presumed that if you modify your Decree in the future it will not impact the tax status determined prior to 2019, so it may still be deductible/taxable.
It is important to speak with a family law attorney to understand the upcoming changes to the tax laws and the impact on your divorce proceeding. Should you require additional information on this topic, please feel free to contact Simpson Legal Group, LLC at (712) 256-9899.