Under the Tax Cuts and Jobs Act passed last year, alimony rules are about to change in the United States. Couples filing for divorce must settle terms before 2018 is over, lest they want to be subject to the statutes set in place by the recent tax reform.
For 70 years, alimony payments have been tax-deductible under federal law. Currently, individuals paying alimony can deduct the amount on their taxes, while individuals receiving alimony must claim payments when filing taxes. This will all change on January 1, 2019. Soon, individuals who pay alimony will not be able to deduct payments on their taxes, and individuals receiving alimony will not have to claim payments when they file their taxes. These changes already have many couples rushing to file divorce papers by the end of the year.
Although the new tax law should, in theory, benefit those receiving alimony, because they will no longer have to pay taxes on it, many are concerned it will actually be worse for those receiving alimony—especially women. Studies have indicated that women often struggle more financially following a divorce, and in many cases, their income drops over one-fifth, while men with children frequently see their income go up by a third. Although statistics show a rise in women becoming the primary breadwinners in their families, the 2010 census indicates that of the 400,000 people currently receiving alimony in the U.S., only 3% are men. Many women who need spousal support after a divorce are now at risk of receiving smaller payments from their partners, who will likely try to negotiate payments down, knowing they will have to pay taxes on them every year.
Many are also wondering how the new rules will affect postnuptial and prenuptial agreements. It is possible that courts will increasingly try to put a cap on payments now that they are no longer tax-deductible. With the shift in policy expected to raise almost $7 billion for the IRS over the next decade, one thing financial experts can agree on is that all parties who are entering into, or have recently entered into, a divorce should reexamine their agreements with an experienced accountant or divorce lawyer to ensure their current arrangement will benefit them in the long-run.
Hire a Charleston, WV Divorce Attorney Today
At Hardy Pence PLLC, we are committed to making sure our clients receive the settlement they deserve. Our Charleston, WV divorce lawyers provide hands-on legal representation and personalized attention every step of the way, so you never have to feel like you are going through this alone. And, with years of experience in equitable distribution, spousal support, and high-asset divorce, you can trust that we know how to advocate for the maximum settlement in any case. Don’t let the latest tax laws prevent you from receiving the alimony payments you deserve, contact Hardy Pence PLLC today.
Talk to a divorce lawyer on the phone at (304) 345-7250, or contact us online for a confidential consultation.