Alimony Changes Under the Trump Tax Plan
The Republican Congress recently passed a Trump tax plan that will treat alimony differently for both paying and receiving spouses. As of January 1, 2019, spousal support may not be deducted from the income of the paying spouse. It will also no longer be taxable by the receiving spouse. This will result in higher income taxes for spouses paying alimony and a lower reported income by the receiving spouse.
Because spousal support payments will essentially be unreportable on income taxes under the Trump tax plan, it’s even more important to seek the help of an alimony lawyer when negotiating your divorce. In order to come to an agreement that is beneficial to all parties, you should carefully evaluate your specific situation and how the new tax plan will impact you.
The Trump Tax Plan May Mean Higher Taxes for You
If you have been ordered to pay alimony, you are aware that part of your income is being paid out to your ex-spouse. Under the current tax plan, you may deduct that amount from your income. As a result, your adjusted gross income may be lower as well as your tax rate. However, under the Trump tax plan, new alimony payers will not be able to deduct those alimony payments. Instead, your spousal support payments will not be deducted and your income tax bracket may be higher.
You Can Still Deduct Pre-2019 Alimony Agreements
Although divorces that take place on or after January 1, 2019 will not be able to deduct alimony, the IRS will treat any agreements made prior to that date as they were previously. Thus, if you were able to deduct your spousal support payments through an agreement made prior to 2019, you should still be able to deduct those payments from your income. Only new divorces and new alimony orders will be impacted. An alimony lawyer can help you understand if your agreement qualifies for deductible spousal support.
Only Alimony That Fits the Tax-Law Definition Is Included
When determining whether you can deduct alimony from your income taxes as allowed for pre-2019 orders, you must consider whether the spousal support qualifies under IRS definitions. What your divorce decree says may not matter. An alimony lawyer can help you understand when spousal support meets the following requirements:
- It must be paid pursuant to a written instrument. This means that you must be paying spousal support as ordered in a divorce decree, separate maintenance decree, or other separation instrument. Payments to your spouse that are not ordered in a written instrument do not count.
- Payments must be made on behalf of the spouse. This means that you must be directly paying your ex-spouse. Child support, payments to attorneys, or creditor payments do not count.
- Payments may not be stated to be “not alimony.” If your divorce decree specifically states that your payments are “not alimony,” it’s not deductible.
- You may not live in the same household or file taxes jointly. If you have not officially separated yet, you may not deduct your alimony.
An Alimony Lawyer Can Help You Understand the Trump Tax Plan
If you are currently going through a divorce, you should avoid negative impacts of the Trump tax plan. An alimony lawyer can help you understand your legal options and negotiate a fair agreement for all parties. Contact the Law Office of A. Sam Jubran, P.A. today at (904) 360-6100.