We recognize divorce is a difficult decision and a major life change. While you may be contemplating if seeking a divorce is the right choice for you, we at Statt Law wish to make you aware of the tax law changes that could have a huge impact on your financial future. Recent legislation has changed a 76 year old tax deduction that was enacted shortly after World War II .
This change in IRS code will likely increase the cost of your divorce settlement if you finalize your divorce after 12/31/2018. Any person paying alimony will have the tax burden of alimony payments starting next year. If you believe there is a possibility you may be subject to an alimony claim in a future divorce and are contemplating end your marriage, you may want to file for divorce early in 2018.
For those who are unfamiliar, alimony is a court-ordered provision for one spouse to make payments to the other former spouse after a divorce is final. This is true even with middle to low income parties with little to no assets. Typically, if you earned more than your spouse during the marriage, then you may be open to a claim for alimony and should consider filing immediately regardless of your income level. Currently, alimony payments are tax deductible for the party paying, and are taxed like regular income for the recipient. Under the new law, this tax deduction is eliminated for the person paying alimony and the tax burden shifts to the paying party. Any divorce order issued or settlement agreed upon, after December 31, 2018, will be affected by this change.
While a tax deduction should not be the sole basis for a decision to divorce, this kind of financial impact can be the difference for some people between having a financial future after divorce or not being able to pay your monthly bills. On average, it takes 10 months to complete the divorce process in America, but yours does not have to take as long. This is why you should file immediately. If you have the divorce agreement or order prior to December 31, 2018, then alimony can be tax deductible for years to come and will likely be "grandfathered" in under the new law.
If you are thinking of divorcing your spouse, please call Statt Law at (717) 537-0928 today for a consultation. We are a Kid First family law firm focusing on divorce, estate planning and veterans' disability.
This article is intended to be informational use only and is not a substitute for legal advice. Please contact an attorney to discuss all your legal options.