Alimony – Should I slow down or hurry up my divorce because of the changes in the tax law? The Trump administration has significantly changed the tax code regarding the treatment of alimony. Effective January 1, 2019 the recipient spouse will no longer report alimony as income and the paying spouse will lose the tax deduction, to include legal fees directly attributable to securing spousal support.
Timing is Everything
Depending upon which side of the divorce you are on may determine if you want to slow your divorce down or speed it up. Divorce or Separation Agreements and Modifications involving alimony that are finalized by December 31, 2018 will not be affected by the new tax laws.
On its face, the code change appears to benefit the alimony recipient over the payer, or does it? Unlike child support, alimony calculations are not mandated by statute, meaning there are no hard and fast calculations that govern the amount of the alimony support. Generally speaking, alimony is based on the need of the recipient and the ability to pay on the part of the payer. As a result of no clear directive, rather than go through an expensive and lengthy trial to determine an alimony amount, commonly the parties negotiate the alimony amount. An incentive of the paying spouse to negotiate a livable support amount for the recipient has been the tax deduction. With this incentive gone, the likely result will be less advantageous support amounts for the recipient and more court involvement to determine the appropriate alimony award, thereby causing legal fees for both parties to increase.
Therefore, if you are the one paying the alimony, it may be to your advantage to finalize your divorce by December 31, 2018. On the other hand, if you are the recipient it may be to your advantage to prolong your divorce as long as your alimony support works to your financial advantage.