Alimony and the New Tax Bill
Much of the legal framework that governs family law cases such as divorce often occurs at the state level. Sometimes, a landmark U.S. Supreme Court ruling or an important bill passed in Congress can have a major ripple effect on family law matters throughout the nation. We are in the midst of one such major change. While the effects and ramifications of the new tax bill are still being analyzed, one portion of the bill will have a large impact on future divorce cases.
Under the new tax plan, spousal support (alimony) for all divorces finalized after December 31, 2018 will no longer be tax deductible for the payor spouse, nor will it be counted as income for the payee spouse. Alimony is now treated similarly to child support. While this may prove a benefit to a lower income earning spouse, it is highly likely to prolong divorce litigation and make negotiating separation agreements more difficult.