The recently approved Tax Cuts and Jobs Act, or HR1, could have a serious impact on your spousal support expenses. Previously, individuals who make spousal support payments were able to receive certain tax deductions, but this new bill will put an end to these breaks. Unfortunately, this isn’t just bad news for folks who already pay alimony, it might also impact couples who are just now starting the divorce process. Because this new law takes away one of the few advantages of paying spousal support, we can expect negotiations to become more complex and drawn-out.
If you receive or pay spousal support, or if you are currently working through a divorce, make sure you understand how the new Tax Cuts and Jobs Act could affect you.
Understanding the New Tax Reform
This new tax code was approved by President Trump and will take effect on January 1 of 2019 and will continue thereafter. It will no longer allow the paying spouse to claim tax deductions for paying spousal support during or after a divorce. This also means the receiving spouse will no longer need to pay income taxes on the funds they receive for alimony.
Financial Setbacks
Even though the new tax reform can be beneficial for the receiving spouse, it might spell disaster for the paying spouse. Individuals who pay alimony will end up taking a bigger financial hit when they are no longer allowed to claim their deductions when they file taxes, ultimately increasing their expenses.
How Will My Divorce Be Affected?
Couples who are currently going through a divorce and those who will divorce in the future will likely feel the sting of this new tax reform. Because the paying spouse will lose their deductions under the new GOP bill, they are far more likely to fight that much harder to decrease their alimony payments. This could lead to more negotiations, more court dates, and therefore more legal fees, costing both the receiving and paying spouse more time and money.
If you are worried about how the new tax reform will impact your expenses, our firm can help. Whether you are currently paying alimony or are about to file for divorce, our firm can help you figure out how the new tax change could impact you, and come up with a resolution.
Contact The Law Office of Dmitriy Borshchak to discuss your case with our Columbus divorce attorneys.
