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How the New Tax Law Will Affect Alimony

Blog 2018 March How the New Tax Law Will Affect Alimony
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How the New Tax Law Will Affect Alimony

Posted By Stepniak & Park || 2-Mar-2018

When couples get divorced in Florida and in other states throughout the country, the spouse that is not the main breadwinner of the family often seeks spousal support, also known as alimony or maintenance. Alimony is a form of financial assistance that is paid by one spouse to another.

While many couples do not have equal earning capacities, one spouse may not even have an income in some cases. In the event of a divorce, maintenance payments help to keep the spouse with less earning potential financially stable. Spouses who are required to pay alimony typically do not mind because, under current law, these payments are deductible to the payer.

Unfortunately, alimony deductions will be a thing of the past according to the new tax law. According to the new law, the paying spouse cannot deduct alimony, and the supported spouse can no longer has to pay taxes on it.

The provision would take effect for divorce and separation agreements signed after December 31, 2018. Furthermore, the new rule wouldn’t affect anyone already paying alimony.

Divorce lawyers throughout the nation say this move could make ending marriages an even lengthier and more costly process. Attorneys typically use this tax deduction as a means to reach a settlement easier since there was more money to work with. Without the deduction, there is less money to go around.

Spillover implications of eliminating the alimony tax include complicating how child support is calculated. The change can also affect how assets are split up.

Additionally, the move could be particularly harmful to lower-income couples. While wealthy couples can often afford higher taxes on alimony payments, it is those spouses with limited means where a few hundred dollars per month is going to make a significant difference in their quality of life.

Prenuptial—and postnuptial—agreements generally contain clauses that are tailored to the couples needs, including how alimony is awarded. However, these agreements have alimony provisions with the tax deduction factored into the equation.

If you are interested in filing for divorce in Florida, schedule a consultation with our Daytona Beach family law attorney at Law Offices of Robert Stepniak today. Contact us for more information about the new tax law.

Categories: Divorce

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