In a previous blog entry, we talked about how the House Tax Bill proposed the removal of the alimony tax deduction. In contrast, the Tax Bill that was pending in the Senate still included the alimony tax deduction.
However, the bill that ultimately made its way to the desk of President Trump was in line with the House Bill and eliminated the alimony tax deduction. This bill was signed into law by President Trump.
Under the terms of the bill, the alimony tax deduction will cease to exist for alimony (or spousal support or maintenance) for awards entered after the end of 2018. The net effect is that there is a year period for states to figure out what, if any, changes they will make to their alimony/maintenance laws.
It could be that some states will opt to make some adjustments to the alimony/maintenance laws and formulas in light of this new tax bill. It might be that many will not end up making any changes.
Regardless, the impact on how divorce cases are litigated could be astronomical. Under this new tax law, payors of alimony/spousal maintenance will no longer get to deduct their payments on their taxes. On the flip-end, those who receive alimony/spousal maintenance will no longer have to include the amount they receive as income on their taxes.
This will, in the eyes of the same, result in a windfall for those receiving alimony/spousal maintenance. Many also theorize that payor spouses will be less inclined to pay alimony/spousal maintenance by consent. Instead, they will opt to litigate their case given the financial hit that might worry them.
Some think as well that family and divorce courts might be less inclined to enter lucrative alimony/spousal maintenance awards when the payor is no longer able to deduct it on their taxes. Nonetheless, it will be interesting to see how this impacts divorce cases in 2019 and beyond.
If you are involved in a divorce where spousal maintenance is an issue, you can call 855-805-0595 or contact our Springfield, Missouri Divorce Lawyers in Greene County.