Divorce can be messy for any Massachusetts couple. The splitting of property, child custody, spousal support, deciding who gets the dog, etc., are all areas that must be addressed during a divorce. Throw in a tax change after decades with the same tax law, and another wrench is thrown into the whole process. Under the new tax laws, alimony agreements may become tougher for couples seeking to divorce.
For the last 75 years, the Internal Revenue Code for alimony, more or less, has remained the same. The payer, typically the higher income earner in the household would receive a tax break for supporting the ex-spouse financially. In return, the recipient paid taxes on the money received.
The new tax law will make divorce a little bit messier as the tax break incentive is removed. As of 2019, new alimony payers will no longer be able to deduct spousal support. However, the recipient will not be required to pay taxes on the financial support. It may appear that the change benefits the recipient; however, a payment agreement in a divorce settlement may be much less than as it would have been under the old law due to lack of a tax incentive.
As the old saying goes, two things are always guaranteed in life, death and taxes. However, the new tax laws disrupt the traditional tax treatment of alimony, adding to the strain of a divorce. Massachusetts couples working through a divorce can seek solace in a knowledgeable divorce attorney to aid with the new tax laws regarding spousal support.
Source: CNBC, “Alimony tax changes may scorch divorcing couples“, Annie Nova, Feb. 16, 2018