Spousal support, also known as alimony, can be an especially thorny part of a divorce. With one spouse trying to protect their financial resources and another trying to preserve their lifestyle, it is easy for emotions to run high. Then throw in everyone’s favorite financial obligation: taxes.
Changes to the tax code that took effect earlier this year made a sweeping impact on several aspects of divorce – in one case, turning a long-standing rule on its head. For those facing divorce in 2019, here is what you need to know:
Flipping the script on alimony
For the last 70 years, alimony payments were tax-deductible for the person making support payments and taxable income for the person receiving them. However, beginning in January 2019 this long-standing rule went away. Without the benefit of a tax deduction, spouses with higher income will fight for lower alimony payment, leaving lower-income spouses in a tough financial position.
Changes to child tax credits
Those divorcing with children now must consider the impact of changes to tax deductions for children. Child tax credits increased from $1,000 to $2,000 per child under the new rules. This could have a profound impact on the life of a divorced spouse who takes custody of several children.
Already divorced? New tax laws could still affect you
Even those whose divorce was finalized by December 31, 2018, could still feel the impact of the new tax regulations. For example, modifications to divorce decrees made this year and beyond will need to specify which set of rules apply to the change. An agreement that remains silent on the issue will fall under the new tax rules.
Divorce is rarely easy, but it doesn’t have to feel impossible. Consulting a family law attorney on the tax implications of your divorce can help clear the path ahead.