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Reminder: Tax laws are changing for divorcing couples in 2019

Divorces can be extremely complex. Taxes on spousal support can make matters more complicated, especially with the changes that are set to take effect on January 1, 2019.

In the past, spousal support has been tax deductible by the spouse making payments and taxable to the spouse receiving support. The new laws are going to change for people getting divorced next year, and the changes are likely going to affect high-asset divorces the most.

According to Forbes, high-income earners can currently save tens of thousands of dollars in taxes from spousal support deductions. The article provides an example of the current law as follows:

For every $100,000 in alimony paid, it only costs the payer $50,000 after-tax. The recipient on the other had may only have to pay $20,000 in taxes on that $100,000 received resulting in $80,000 of after-tax income. The net savings to the family is a $30,000 difference.

Under the new law, a paying spouse will no longer be able to deduct spousal support payments on their taxes. Similarly, a spouse will no longer include payments they receive as taxable income. These new laws could have major implications on divorces in the new year. Some judges speculate that high-income earners will fight more aggressively to pay less in spousal support without the benefits of tax deduction.

If you divorced prior to 2019, the laws concerning spousal support will remain the same. If you are considering a divorce in the new year and are concerned about the tax implications, consult with an experienced divorce attorney to discuss your options.

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