The new tax regulations are going to significantly change the way that alimony is approached in the future.
For the last 75 years, people have been able to deduct their alimony payments. So, if you had to pay $24,000 per year to your ex, you could at least write that off on your taxes. On the other end, your ex had to claim that the $2,000 per month was income, meaning he or she paid the taxes instead.
That’s going to switch. The deduction is over next year, and those who get money do not have to keep claiming that it is income. This means that the person paying alimony will also be the one paying income taxes on it beforehand, whereas the person receiving alimony gets to keep the full amount without paying taxes.
This overhaul does not apply yet, and those who already have their own alimony plans in place do not have to change them. The alterations to taxes just apply to new divorces starting next year.
Many experts say that this is driving some people to seek divorce far sooner than they may have otherwise. Specifically, if someone thinks he or she will definitely have to pay alimony, that person may want to get divorced in 2018 so that the deductions still stay on that side of the equation.
It will be interesting to see how this impacts the amount of divorces in 2018 and how it changes divorce rulings in the future. This also shows why it is so important for those who decide to get divorced to keep an eye on updates to the law so that they know their legal rights.
