— Change Coming To Alimony Tax Law—

What to know before January 1, 2019

Alimony can be one of the most complicated and sensitive issues in a divorce. Currently, there are tax benefits in place for divorcing couples who pay or receive alimony., The current tax law allows the spouse paying alimony to deduct the payments from their income for tax purposes. The spouse receiving alimony is required to pay taxes on the alimony payments. Since the paying spouse is typically in a higher tax bracket than the receiving spouse, the government effectively finances a portion of the alimony payments.

Beginning January 1, 2019, a change in federal tax laws will no longer allow the paying spouse to deduct payments from their taxable income in a new divorce settlement. The good news is any agreement including alimony payments settled before this date will be grandfathered in under the changes. Although time is running out to complete standard divorce proceedings prior to the changes, there is an option to expedite a divorce prior to the end of the year.

Collaborative divorce is a great option for those who want to avoid the time and costs of court proceedings but are unable to resolve their divorce using mediation. This type of divorce involves both parties meeting with their attorneys and ironing out the divorce agreement without court intervention. Typically, collaborative divorces can be completed in a fraction of the time compared to a traditional court divorce, possibly allowing the alimony payments to be applied under the current tax laws.

No matter what path you choose, it’s always important to consult with an attorney who can advise you on the best course for your situation. Our attorneys at Kreshtool & Kreshtool are educated and experienced with all options and are happy to review your situation and make the best recommendations to help best ease the financial impact of your divorce.

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