How Alimony Tax Changes in 2018 Will Impact You
One of the changes to the law made by the Tax Cuts and Jobs Act is the elimination of the tax effects of alimony payments as of January 1, 2019. Prior to January 1, 2019, in most cases, alimony is a tax deduction for the payor and is taxable income of the recipient. As of January 1, 2019, however, alimony payments are not deductible by the payor and are not included as income by the recipient. This change is expected to reduce the amount of alimony payments, because it is will reduce the cash flow of both the payor and the recipient. It may also impact child support, which is determined in large part based on the incomes of the parties.
Major Change to Alimony Tax Deduction for 2019
This law will not impact alimony awards in judgments and orders entered prior up to and including December 31, 2018, and the law cannot be used as a basis to modify prior alimony awards. Modifications of awards entered prior to January 1, 2019 will be determined based on the law in effect at the time of the entry of the judgment/order unless the judgment or order specifically states that future modifications of alimony are subject to the tax law at the time the judgment/order was entered.
One thing that is not clear is the impact this law will have on divorces filed on or after January 1, 2019 which involve prenuptial (or postnuptial) agreements entered into prior to January 1, 2019.