Tick, Tock: Impact of the New Tax Law on Alimony and Divorce
Do you have clients getting divorced in 2018 that are planning to pay or receive alimony?
You may not realize it, but there’s a tax timer hanging over your head and the buzzer is about to go off. Current Law Based on current law, the payer of alimony may deduct the full amount from their taxable income and the recipient treats it as taxable income.
The New Tax Law The new tax law does away with the tax deduction for alimony. Of course, the alimony will not be treated as taxable income to the recipient. The new law goes into effect for divorce cases finalized with the court after December 31, 2018. Why Does it Matter? For the past 75 years, the tax deduction has made alimony a valuable negotiation tool used by attorneys across the country to help settle divorce cases.
In fact, it has often been one of the only ways to provide a win / win during a difficult financial time for both parties. If you have questions on how this might affect your client, please give us a call at 817-341-6747 and we will be glad to help you.