As the new year dawns, many people here in Florida and all around the country may be looking to end their marriage. It is often a time for self-reflection and some may find that their current relationship is not one they wish to continue. However, those looking to divorce in the new year should be aware of the new tax laws take effect on Jan. 1, 2019, which could have dramatic implications on alimony payments, particularly in a high-asset divorce.
The Tax Cuts & Jobs Act has brought certain decades-old tax laws regarding alimony to an end. The old laws required alimony recipients to pay taxes on the payments, and allowed those paying alimony to deduct the amount on their income taxes. Now, that deduction will go away, and may cause higher-earning spouses to fight to pay less alimony to their lower-earning ex-spouse. Furthermore, those who are already divorced might be affected if they choose to explore a modification to their original divorce agreement.
There are steps that divorcing spouses can take that may result in a more amicable agreement for everyone involved. There may be other assets that a higher-earning spouse could offer to the lower-earning spouse instead of alimony, or as a trade-off for a lower payment. An IRA could be set up for the lower-earning spouse, who would pay taxes on the amount only when he or she decided to access the money. Or, a one-time, lump sum payment could be given instead of monthly alimony payments.
With all these potentially-confusing changes to the tax laws, Florida residents seeking a divorce in the new year may best be served by consulting an experienced divorce attorney. A professional could help a client navigate through all the decisions that will have to be made with a high-asset divorce and assist him or her in deciding what best suits the client’s interests. Alimony is just one issue of many that will need to be addressed, and an experienced family law attorney is a valuable asset in these circumstances.