Alimony Taxation

What you should know about alimony taxation changes.

Signed into law on December 22, 2017, the “Tax Cuts and Jobs Act of 2017” changes the existing tax code.  One of the crucial implications for our clients is the changes to alimony taxation. 

Under the previous law, alimony was deductible by the spouse paying alimony (the obligor).  Alimony received was once considered taxable income on the spouse’s tax return receiving the spousal support (the oblige).  Accordingly, alimony was taxed as the oblige spouse’s income.

The 2017 Tax Act will change this law going forward.  For divorces after December 31, 2018, obliger spouse will not deduct alimony.  At the same time, the obligee spouse will not have to pay taxes on alimony received. 

Couples navigating divorce should carefully consider the tax implications of alimony when negotiating settlement agreements. Factors such as the amount of alimony, the duration of payments, and the overall financial situation of both parties can significantly impact the financial outcome for both spouses.

The taxation of alimony has evolved over the years, with the law bringing about substantial changes. Understanding these changes is crucial for divorcing couples navigating the complexities of alimony negotiations. Seeking the guidance of legal and financial professionals is advisable to ensure that both parties make informed decisions that align with their financial goals and obligations. As tax laws are subject to change, staying informed about any updates or amendments to alimony taxation is essential for those involved in divorce proceedings.

If you have questions about alimony taxation or divorce, contact Angel Kane at (615) 444-8081 or https://www.kane-law.com/contact-us/