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The big news in divorce as the New Year begins? Starting January 1, 2019, a significant change in how alimony payments are treated under federal tax law goes into effect. As part of the Tax Cuts and Jobs Act (aka “Trump Tax”), spouses who pay alimony must now claim alimony payments on their federal tax returns as taxable income; spouses who receive alimony are not required to claim alimony as income and receive this money tax-free.
The new tax change represents a complete reversal of the old federal code in which paying spouses deducted alimony from their income as a tax break, while recipient spouses were required to claim payments as taxable income. Any alimony order put in place on or before December 31, 2018, is grandfathered in under these old rules.
If you are currently going through a divorce that involves alimony, or are pursuing temporary alimony during a separation, you will need to grapple with these new tax implications. If you are the paying spouse, you probably want to know… is there anything I can to avoid this extra tax burden? If you are the receiving spouse, your main question may be… what can I do if my spouse low balls alimony in our divorce negotiations?
Bari Weinberger took a deeper look at alimony negotiations under the new tax law in her piece for the New Jersey Law Journal: The 2019 Alimony Tax Change Is Here — But Is It Fair? She described how changing tax rules will necessarily mean changing tactics in reaching an alimony agreement.
Here are 3 takeaways for your own alimony negotiations. Read more