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 Milwaukee and Waukesha attorney for child support and spousal maintenance. Call (414) 210-3135 or send us an email.
Many spouses from the baby boomer generation divided the responsibilities of a family by having one earn income outside of the home, aka the breadwinner, while the other stayed home with the children, perhaps while holding down a part time job to make ends meet.
Flash forward 20 years and nearly 50 percent of couples of that generation are now contemplating divorce, likely leaving the spouse who gave up his or her career to stay home with the children worried about how they will manage financially. That’s where spousal maintenance comes in.
If you and your spouse have been married for a long duration and are divorcing, and there is a large disparity in income, one spouse will likely be ordered to pay spousal maintenance to the other for an indefinite period of time.
Contrast this with someone who has had a marriage of a short duration and they may be looking at temporary support until the recipient can get back on their feet, perhaps by brushing up on job skills via training or education.
A judge considers many factors when determining if and how much spousal maintenance to award, which includes the length of the marriage, the age of the parties involved, health or disability factors, income, future earning power, education, and job skills. The court strives to make it fair so that both parties can move forward.
Experience Does Matter – Contact Waukesha Spousal Maintenance Lawyer Jane Probst
An order for Wisconsin alimony will depend greatly on your attorney’s ability to make a case for or against spousal maintenance. If you are seeking spousal maintenance for yourself or are the potential payer of alimony and believe your ex could be self-supporting, it is important to work with an experienced Wisconsin spousal support lawyer to argue on your behalf. Contact the Waukesha Family Law Offices of Jane E. Probst for more information regarding Wisconsin spousal maintenance at 414-210-3135.
Spousal maintenance, or Alimony as it is sometimes referred to, is a legal obligation to provide financial support to a spouse after a divorce or separation.
Alimony, unlike child support, is decided on a case by case basis, either through the process of negotiating a divorce settlement agreement between the parties or by order of a judge in consideration of factors such as the length of the marriage, earning capacity of the spouses, and the like.
Currently, the payor of alimony is able to deduct the payments of alimony on their tax returns while the recipient pays taxes on the amount received as if it were regular income.
This arrangement, of course, is beneficial to the payor of alimony by reducing their taxable income and, since the recipient often makes less money (and is therefore is in a lower tax bracket), the taxes paid are minimized.
All that tax savings is set to change with the new tax law, however. When the law kicks in January 1, 2019, couples considering divorce will want to take into account that the payor spouse of alimony will no longer be able to deduct payments made to the recipient, who will not claim alimony as income for tax purposes.
Generally speaking, anyone already paying support will be not be affected. However, if court ordered alimony is modified after the law goes in effect, your new order will likely fall under the new rules.
Questions About Your Alimony Tax Deduction?
Contact an Experienced Wisconsin Spousal Support Attorney for Answers
The Wisconsin spousal support, alimony and family law attorneys of Jane Probst Law Offices can answer your alimony tax deduction questions. Send us an email or give us a call at (414) 210-3135 to schedule your free consultation.