Langley, Nagel, Crawford & Modica

Will tax reform have an impact on alimony?

For divorcing couples, reconciling their finances is a major part of the process. Working out items like asset division and spousal maintenance can sometimes bring negotiations to a screeching halt. In particular, alimony can be a sticking point for both parties, though traditionally it has at least offered something for both sides: a source of income for recipient, and a tax deduction for the payer.

With the recently passed tax bill, that should change significantly. Measures in the new tax code will have a substantial impact on spousal support, and Florida couples who are approaching a divorce may want to look deeper into what’s specifically changing.

The future of alimony

For much of the past century, the concept of alimony has adhered to a certain truth: the person who’s paying it out can claim it as a deduction, and the receiving party will pay income tax on it. The former in that scenario is often used by lawyers who seek to make a settlement more palatable, as there is an incentive for both parties. Beginning Dec. 31, 2018, however, that will all change.

Going forward, alimony payments will no longer qualify as a tax deduction. Beyond that, the recipients of those payments will also not need to pay taxes on them. This represents a huge shift toward one side of the alimony equation, which in turn could really affect divorce negotiations in the future, as it may be more difficult for some couples to reach an agreement.

Planning ahead

The new tax code will also likely have an impact on prenuptial agreements. Typically, these contracts will outline future alimony payments in the event of a divorce, previously accounting for the fact that said payments would be deductable. With the new changes, couples who are drafting such agreements may need to rethink some figures.

As always, it’s prudent to consult with an attorney when considering a divorce. Aside from the new tax code, divorces tend to be full of financial intricacies that a legal professional may be able to better navigate.

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Langley, Nagel, Crawford & Modica
Chartered Attorneys At Law

1201 W. Hwy. 50
Suite A
Clermont, FL 34711

Phone: 352-432-1435
Fax: 352-394-7298
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