Alimony/Spousal Support Impacts under the 2018 Tax Law Changes
The new tax code that recently passed through congress will have significant impacts on divorcing spouses in Idaho who may have considered spousal support (also known as alimony).
Prior status of alimony deductionsPreviously, if a spouse was paying spousal support to the other spouse either while the divorce was pending or after the divorce, the paying spouse was able to deduct their payments on their taxes. The spouse receiving the payments paid taxes on the payments, just like any other income they would receive.
Tax implications going forwardUnder the new tax law, beginning January 1, 2019 and thereafter, the paying spouse will no longer be able to deduct their payments to the other spouse on their taxes. The spouse receiving alimony will not have to count the payments as income for tax purposes. This only applies to divorces that are finalized after the January 1, 2019 benchmark however. If you are currently paying or receiving spousal support from a divorce, your tax burden will not be affected by this change.
What this means is that the agreements divorcing spouses previously reached regarding alimony will likely look very different in 2019 than in years* past. Each spouse will need to consider how the changed tax burden will impact them. Additionally, some news sources are predicting that this will lead to a surge of divorces in 2018 because couples may want to take advantage of the prior tax law while they still can. If you are considering a divorce where you believe alimony may be an element of the divorce, you should consult an Idaho divorce attorney to talk through how the new tax law will impact you personally. Depending upon your specific circumstances, there may be reasons to seek to finalize the divorce before 2019 to take advantage of the prior tax law. The experienced alimony attorneys at Jones & Swartz can assist you in evaluating all of your options and finding an arrangement that best serves your needs.