Last year in late December, the 2017 Tax Reform Act was signed into law by President Trump. The law substantially changed the tax liabilities of individuals. But, a significant change in the law relates to divorce and changes in deductibility of alimony.
If you pay alimony for your ex-wife, this is a significant change for you. Men and fathers that go through divorce often pay spousal support for their ex-spouses’ expenses, being the higher earning or the more well-off partner. Discover what the new tax system means to you as the higher earning partner.
In the existing tax code provisions, alimony is considered income to the recipient. This means that the paying partner may deduct the alimony amount from their taxable income. The alimony is taxable on the recipient’s income.
This system will soon be ended in spousal support orders: separation orders, permanent orders at the end of a divorce case, or temporary orders during the tenure of divorce litigation. The new system will be followed for all orders entered after December 31, 2018.
How Does the Tax Overhaul Affect Divorce Litigants?
After December 31, 2018, alimony will become tax-neutral. This means there will be no tax implications to either spouse for alimony payments. The alimony paying spouse will not get to deduct it from their taxable income, and the recipient will not need to claim it as their income.
The new alimony system will resemble the way child support payments are treated in the present scenario. New Jersey has witnessed quite a few recent changes in the alimony payments law. Back in 2014, Governor Chris Christie had signed a reform bill that made some stringent requirements for awarding alimony. The concept of “permanent alimony” was replaced with “open durational” alimony.
The federal tax provisions will clearly make alimony negotiations more difficult for spouses obtaining a divorce in New Jersey. The paying spouses will have to do away with the tax deduction they were entitled to previously.
Many divorcing individuals do not like having to pay alimony, as they do not want to pay for their former spouse’s expenses. Tax deductions acted as a respite for them. Now that tax deductions are eliminated, there are no incentives for the higher-earning spouse and alimony settlements may become a challenge.
If you want your alimony tax liabilities to be tailored to your unique needs, The Micklin Law Group can assist you. Attorney Brad M. Micklin can help your case by apportioning(dividing between two parties) the tax liabilities between you and your ex based on your respective incomes, or property division can be used to counterbalance alimony payments.
If you have questions about how alimony settlements can affect you in the future, contact experienced family law attorney Brad M. Micklin who focuses on working with men going through a divorce.
Men’s rights for alimony and spousal payments will be well taken care of by The Micklin Law Group.