A reminder to those considering divorce…new tax laws will impact how spousal maintenance is treated beginning January 1, 2019, which can make a difference in how much money remains in the the family unit.
Current Tax Laws and Spousal Maintenance
Spouses who pay alimony that finalize their divorce on or before December 31, 2018 will be able to deduct the alimony paid from their taxes while the presumably lower earning recipient claims the payments as taxable income. For top earners, this arrangement often translates into a whole lot of money saved in taxes for the benefit of the family unit.
Spousal Maintenance Tax Treatment Changes with the New Year
However, for couples finalizing their divorce on or after January 1, 2019, alimony will not be deductible by the payor or taxable to the recipient. Although at first glance, many think a recipient might favor such a change, the shift will likely result in less alimony being paid when a payor loses the incentive of a reduced tax burden.
How Does the Law Apply When Couples are Already Divorced?
The law permits ex-spouses to modify an earlier divorce agreement to adopt the new rule after it goes into effect in 2019, however if a pre-2019 divorce is not modified, your ‘grandfathered-in’ allowing the payer to continue to deduct payments made and the recipient to pay the taxes on what is received. Seek the help of an experienced divorce lawyer to see if a modification is right for your situation.
The timing of your divorce can impact the amount of spousal maintenance you will receive. If you have questions regarding Wisconsin divorce or spousal maintenance, contact Probst Law Offices for a free, half-hour initial consultation with an experienced Brookfield and Waukesha attorney for child support and spousal maintenance. Call (414) 210-3135 or send us an email.