Alimony Deadline looming
Alimony No Longer Tax- Deductible: Looming Deadline
This article is of interest for those who are paying alimony or who may have to pay it soon. We know that laws change quickly and the deadline for the ability to deduct alimony payments from your taxes will end this December 31, 2018.
New Rules of the Game
The new rules are making it difficult for some spouses to settle their business before the deadline arrives. The spouse paying alimony will no longer be able to deduct this from their yearly taxes, but that’s not all. The party receiving maintenance will no longer have to pay taxes on the money collected.
Because the deadline is looming, hopefully you have started your divorce process earlier this year. If you have a pending divorce, you will want to get moving to finalize things before it is too late.
For those of you who will soon start paying alimony, let’s clarify exactly what it is and what it isn’t. Alimony is an amount of money paid to a spouse which ensures that the other spouse can maintain a standard of life similar to the one they held while being married. Eligibility for receiving alimony requires evaluation which takes into account many things. For example, the duration of the marriage, how each spouse contributed to the household, the status of life acquired during the marriage, etc. See Florida Statutes section 61.08. For a thorough discussion of alimony issues schedule a consultation with an experienced attorney to discuss all the factors that determine alimony.
One Big Pay Out of Lump Sum
For those who can pay one large sum of money instead of yearly alimony payments, it could be a better option. It becomes an option for the alimony payer if they have Access to the cash. But it is beneficial for both spouses in the sense that it is a way to sever ties to the relationship. In case there is not enough liquidity, the payer may choose to sell their assets, and in turn, the receiver is then responsible for making sound financial decisions to ensure a steady flow of income.
Reestablishing New Agreements
All divorce agreements involving alimony that are final prior to Jan. 1, 2019 are grandfathered in, so they are not affected by the new laws. However, just because divorces prior to 2019 are grandfathered it is important to note that if there are modifications to an established alimony order, attorneys can state that they want to follow the new tax rules versus the old rules.
Thus, the new tax law could affect these new documents in the future.
Because the new law can sharply affect old agreements made under the assumption that alimony payments would remain tax-deductible it is important to seek legal counsel if contemplating a change to an alimony agreement. This change to the deductibility of alimony brings on new terms and issues that will need to be evaluated and agreed upon once again. Any changes to a prior alimony agreement could open up new tax questions.
Adapting
Whether you are new to the alimony process or have been paying alimony for years, and have questions it is important to know what the impact of the law may be. The new tax laws will definitely impact spouses, families, and households across the United States. With December 31, 2018, around the corner there is an urgency of finalizing your divorce before 2019.
For help on this and other legal advice related to divorce and family law call Debora A. Diaz, Esq. at 727-846-1802 or visit www.deboradiazlaw.com.
Written by Debora A. Diaz, Esq.