After the new tax laws regarding spousal support were announced earlier this year, it is hard to go a week without hearing how it will affect people if they do not finalize their divorces by year’s end. Under current tax laws, those paying alimony — whether they reside in Massachusetts or elsewhere — are permitted to use it as a deduction on their taxes, while those receiving it have to report it as income. For those who divorce in 2019, that is going to change.
For those couples who finalize their divorces in 2019, the Tax Cuts and Jobs Act will eliminate the tax deduction for alimony payers and no longer require alimony recipients to report it as income. This law change will not affect those who are already divorced or who finalize their marriage dissolutions by Dec. 31, 2018. Some people think this change is a good thing, while others are not too thrilled about it.
Aside from these tax changes, the way alimony may be paid is also going to be changing. Currently, an individual paying support has to do it with cash if he or she wishes to get the tax deduction. Under the new laws, alimony may be paid by transferring funds from a retirement account to the recipient. This is good for the payer but can have some negative consequences for the payee. For both individuals, it will have a long-term effect on their retirement savings.
Massachusetts residents who need more information on alimony and how the new law change will affect them can turn to an experienced family law attorney for guidance. At the end of the day, working out a support plan that is fair for everyone involved may be possible. Options are out there, it is just a matter of figuring out what works for one’s specific situation.