The taxation of alimony will change drastically starting in 2019. Here’s what you need to know:
Any divorce agreement effective after Dec. 31, 2018 will be subject to new rules for alimony, namely:
- Alimony is no longer tax-deductible for the taxpayer.
- Alimony is no longer taxed as income for the recipient.
That means alimony will be much less affordable for those paying it, while those receiving alimony will not have to claim it as income.
What you need to know
New agreements only. These new tax rules only affect divorce agreements completed after 2018. Tax treatment of agreements made before the end of 2018 or earlier won’t change.
Understand your situation. For pending agreements, the completion date will have major tax impact on both parties. Understand the implications for you.
Get tax help. Because this change is so drastic, taxes are going to be front and center in any divorce settlement. Please ask for help.