Getting a divorce is always complex enough, but changes to the laws make it even more challenging. If you are ending your marriage in 2019 (or later), you are subject to new changes to alimony payments. The former rules regarding spousal support are now completely different.
The new alimony law may make your divorce more costly and complicated. Here is an explanation of the changes and how you can manage your divorce moving forward.
Changes in alimony tax rules
Alimony payments are no longer tax deductible for the payer. Similarly, the recipient will no longer need to consider the payments as taxable income. These changes completely reverse the prior, familiar rules regarding alimony. This can be problematic, especially for high-income divorces.
Consider payment alternatives
Now that the alimony rules may not be favorable to your divorce, you may want to think about other methods of payment. Property division is another way to pay off a spouse without needing to go the traditional route of court-ordered spousal support.
Another option is to opt for a significant one-time payment. Continuous alimony payments over the course of years can add extra strain on divorced couples. If you do not want to deal with any of the strings that come with alimony, think about making a one-time payment instead. This keeps everything drama-free and more affordable.
Remember other tax adjustments
Alimony is not the only thing that is different. You will want to factor in other changes:
- The increase of the child tax credit to $2,000 from $1,000
- The decrease of the cap on mortgage interest deductions from $1 million to $750,000
- The $10,000 cap on state and local income tax deductions
When you account for all these issues, you can make better choices that are financially and emotionally beneficial to you.
While these tax rules regarding divorce can be inconvenient and frustrating, you can navigate through them with help.