Media


04/01/18


Big Changes to Divorce: Alimony & Taxes

By: Monica Garcia Harms

Publication Name:

Bethesda Magazine

The Tax Cuts and Jobs Act signed into law this past December is arguable the most significant revision of the Internal Revenue Code since 1986 and changes the tax treatment of alimony.

Prior to the new law, alimony was tax-deductible for the paying spouse and taxable income to the receiving spouse. Starting in 2019 alimony becomes tax neutral - or nondeductible to the payor and tax-free to the recipient - much like the tax treatment of child support. However, divorce or separation agreements executed prior to 2019 (including subsequent modifications) will preserve the old tax treatment. Subsequent modifications made in later years will preserve the old tax treatment unless the parties mutually agree to apply the new law.

What does this mean if you are considering divorce?

 

  • If your alimony agreement is executed on or before December 31, 2018, alimony can remain tax-deductible for the paying spouse and taxable income to the receiving spouse. Many divorcing couples may want to take advantage of this brief window of time to finalize their divorce agreement.  
  • The law may impact the willingness of a higher earning spouse to agree to a support amount.
  • Overall, there will be less money for a family to allocate between spouses, making living separately even more of a financial burden.
  • You should consult with a family law attorney to determine how this might change your financial reality post divorce.

Learn more about Tax Planning Under the Tax Cuts and Jobs Act.

This article was originally published in Besthesda Magazine's March/April 2018 edition.


See All Media

Resource Center

Sperm Donor Agreements: Why You Need One Even When Using…

The purpose of a donor agreement is to clearly establish that donor is not the child's legal parent.


Read more - Sperm Donor Agreements: Why You Need One Even When Using…
Estate Planning FAQs: Maryland Probate

Letters of Administration? "Interested Persons"? Accounts? Learn about the Maryland Probate Process.


Read more - Estate Planning FAQs: Maryland Probate
Wage Laws in Maryland, D.C. and Virginia: Common Issues

Missteps, such as misclassification of employees and paying workers "salary," can lead to claims.


Read more - Wage Laws in Maryland, D.C. and Virginia: Common Issues
FAQs about Wage Laws in Maryland, D.C. and Virginia

The laws are complex and provide for significant penalties for any violations.


Read more - FAQs about Wage Laws in Maryland, D.C. and Virginia