Law Offices of Amar S. Weisman, LLC
Towson Family Attorneys
Alimony Payments are No Longer Deductible Thanks to Tax Law Changes
Divorce is usually a taxing proposition. It is taxing emotionally, mentally, and physically. Of course, divorce can also be very taxing financially, especially for those spouses who are required to make alimony or spousal maintenance payments. The passage of the Republican tax law at the end of last year has now made such payments even more burdensome and expensive by eliminating the previously existing tax deduction for alimony. For 75 years prior to the passage of the “Tax Cuts and Jobs Act,” all sums paid for spousal maintenance or alimony reduced the payor’s taxable income by the same amount. For most people making monthly maintenance payments – payments which can represent a significant portion of their income - this deduction provided significant tax savings that made the burden of supporting a former spouse a little less painful. “Divorce Penalty” If your divorce has been finalized or is finalized before December 31, 2018, congratulations, you get to keep your alimony tax deduction. But for payors in all divorces finalized in 2019 and beyond, this popular write-off will no longer be part of your tax preparation. The new law also effects any adjustments in spousal support payments made beginning in 2019. That means that if you move to make changes to established alimony obligations next year, you could lose the deduction you now are entitled to. This “divorce penalty,” as it has sometimes been called, is an unwelcome change in the law for several reasons. The ability to take a deduction on spousal support payments was seen by many as an incentive that could help divorcing couples reach agreement as to maintenance amounts. Knowing that they could deduct significant sums from their tax liability, payors could afford to make more generous offers in negotiations. Now, the additional financial strain created by eliminating this crucial deduction could lead to more tension and lengthier disputes about spousal support payments. It also doesn’t help that while the law will make spousal support for the payor more expensive, the recipient won’t have to pay a dime in federal income tax on the spousal support payments they receive. It has been anticipated that the end of the deduction at the end of this year would lead to a “divorce rush” as couples (or at least those who will have to make alimony payments) hurry to get their divorces finalized. Starting next year, however, the tax burden created by the new law may actually make divorce too expensive for some couples, effectively forcing them to stay together -unhappily - rather than establishing two separate households. As noted, the elimination of the alimony deduction can have a significant financial impact not only in terms of how the issue is resolved during divorce proceedings but in the years to come. If you have questions or concerns as to how the new law may affect you and your alimony arrangements, reach out to an experienced Maryland divorce attorney. Your lawyer can explain the tax implications of divorce and advise you of the best course of action.
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