Going through a divorce can be one of the most difficult times of your life. Adding to this is the fact that your financial situation could change in a number of ways.
While not always the case, alimony often comes into play. While this is nothing more than a payment that one individual makes to the other after divorce, there are long-term financial and tax implications to keep in mind.
Under current law, alimony payments are deductible by the person who is making the payment to his or her ex-spouse. Just the same, the recipient is required to count these payments as income on his or her tax return.
However, now that the tax bill has passed, things are changing.
Moving forward, alimony will no longer be deductible by the payer. At the same time, it will no longer be taxable income for the person who receives the payments.
Is this a good thing?
Generally speaking, it all depends on the side of the fence you’re sitting on. However, there’s one thing most people can agree on: With the passing of this bill, there will be no more arguing over who gets tax exemptions. So, if nothing else, divorcing couples won’t have to worry about this conversation (and potential disagreement).
Despite the fact that some provisions of the new tax law are going into effect in early 2018, this provision will not “go live” just yet. Instead, it will only pertain to divorce agreements signed after Dec. 31, 2018.
Matters of divorce and alimony are every bit as confusing as they sound. If you find yourself going through the divorce process and wondering how alimony will impact your future, it’s a good idea to understand this change, along with your basic legal rights.