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New Tax Code Changes Might Impact Your Divorce Agreement

Are you getting divorced or thinking about getting divorced this year? If so, the new Tax Cuts and Jobs Act can have a substantial impact on the outcome of your divorce. Starting on Jan. 1, 2019, alimony deductions will no longer be allowed on federal tax returns. To help you make sure you get the most out of your divorce, we explain what you need to know about the new laws for alimony tax.

How the New Law Impacts Divorces

Before the Tax Cuts and Jobs Act was passed, spouses who had to pay alimony could deduct their payments on their federal income taxes. Spouses who receive alimony payments were also able to report the payments as part of their taxable income on their federal taxes. If your divorce is settled before 2019, the old tax law will continue to apply for alimony payments for both the paying and receiving spouse. If you are already paying alimony to your former spouse, the new changes to the tax code won’t affect your situation and you will still be allowed to deduct your alimony payments from you taxes. If you receive alimony from your ex, you will still be able to claim their payments as part of your annual income.

Because the new tax law will shift the tax burden to the higher earning spouse, divorce lawyers worry that it will make negotiating agreements between spouses more difficult. This is because the spouse who has to pay alimony will want to pay significantly less money to offset their increased tax burden. As a result, divorces proceedings will drag on longer and will be more expensive for both spouses.

IRS data that was collected in 2015 shows that nearly 600,000 Americans claimed an alimony deduction on their taxes.

If your divorce proceedings are still ongoing and you will likely end up having to pay alimony, then the new tax law should be the motivation you need to speed up your divorce so that it is wrapped up before the end of the year. If you anticipate that you will be receiving alimony after your divorce, you might want to slow the process down so that it carries over into next year, this way you will be able to receive your payments tax-free.

Consult with a Divorce Lawyer Today

Our legal team serves clients in Largo, Hyattsville & Bowie. Our skilled divorce attorney can review your case and determine a legal strategy that will protect your rights and interests. We understand that getting divorced can have a substantial impact on your life and finances, which is why we will do all that we can to ensure you obtain a fair result. Let us fight for you.

Contact our dedicated attorneys in Largo to schedule your case consultation.