After 75 years, federal tax reform has done away with the deductibility of alimony payments for the paying ex-spouse. In addition, the recipient of alimony, also sometimes called spousal support or spousal maintenance, will no longer have to pay income taxes on alimony received.
The changes take effect January 1, 2019. All divorces finalized and final (not temporary) divorce or separation settlement agreements executed on or before December 31, 2018, remain subject to the previous conditions.
Get legal advice immediately
It is therefore extremely important if you are in the process of divorcing that you speak to an attorney immediately to understand whether meeting the December 31 deadline to take advantage of current law is in your interest and possible in your circumstances.
Law change may negatively impact divorce negotiation
Many lawyers are concerned that the change will make divorce negotiations more difficult or more contentious because the spouse making more money will be less motivated to be generous in agreeing to pay alimony because he or she will no longer be able to deduct the payments on federal tax returns. Less money overall will be available to meet the expenses of the two new households because the wealthier spouse will pay taxes on the alimony amount at his or her higher rate, rather than having the tax payment made by the less wealthy spouse at a lower rate.
Both the American Academy of Matrimonial Lawyers and the American Bar Association publicly oppose the change in alimony deductibility.
Amendment could disproportionately affect women
Many in the media express concern about the negative affect this change could have on women and children. Most alimony recipients are still women, many of whom have taken time away from the work force to care for children in a traditional role. Those women and children could be less well-off overall after divorce because of the pressure this change puts on divorcing fathers to minimize alimony because it will be more expensive for them to pay in the long run considering the new tax treatment.
The urgency of talking to an experienced family lawyer immediately cannot be overemphasized given the pending deadline of December 31, 2018.
Future modifications
After 2018, people who return to court seeking modification of previous divorces or settlement agreements subject to the previous tax law have the option of staying with the old law or going forward under the new in a modified arrangement.
