There were already financial hurdles in deciding to divorce your spouse, but a new tax law taking effect in 2019 could have an even greater impact. Signed into law in December 2017, the Tax Cuts and Jobs Act makes changes to simplify how individuals and households file taxes, but it also affects those who are divorcing after the start of the new year.
In the past, the spouse paying alimony or spousal maintenance received a tax deduction. The new law takes away the tax deduction for the spouse giving the payment and makes it nontaxable for the spouse receiving it.
What does this mean for your payment?
High-net-worth divorces in New York may see smaller alimony payments making it to the recipient as a result of these taxes. If you are the one who will be responsible for payments after your divorce, you will cover the taxes associated with the support. If you will be the one receiving support from your ex, the payment may be smaller than in previous years, but you will not owe taxes on it.
Whom does the new law affect?
The new law comes into play in 2019. This means any couple divorcing in 2019 will pay the required support and associated taxes as outlined in the new law. It does not affect couples finalizing a divorce in 2018 or those who already have a court-ordered support plan in place.
If you plan to file for divorce in 2019, you will want to consider the implications of this tax law on your financial situation. Careful planning and preparation for spousal maintenance payments is a good idea even if you know you will finalize your divorce before the end of the year.