January is unofficially labeled as “divorce month” by attorneys and researchers due to spikes in divorce filings during the winter month. It is only living up to the name after Amazon CEO Jeff Bezos recently announced his divorce from his wife, Mackenzie Bezos, of 25 years.
Along will high profile separations, divorce month is experiencing changes in how former spouses address alimony payments in future tax filings under the GOP tax law.
A guide to spousal support and taxes
The Tax Cuts and Jobs Act – signed into law during 2018 – brought modifications to previous standards for alimony payments, or spousal support, in tax filings. Previously, the higher-earning spouse provided spousal support to their former partner; then they could deduct their payments on their taxes. The recipient included the support as part of taxable gross income.
Now, alimony payments will no longer be deductible for the payer. Many legal experts fear the loss of deduction will affect the likelihood of spouses receiving alimony payments efficiently. According to Emily Pollock, a partner in the matrimonial and family law department at Kasowitz Benson Torres LLP, payers may resort to prioritizing child support over spousal support or not paying alimony in full amounts.
“There is no incentive to pay alimony now,” Pollock told FOX Business. “It’s all just money out of the pocket for the payer … [it’s] harder to encourage that when you have no benefit to exchange.”
In states like Illinois, courts expect more deliberation and fighting to take place among divorcees due to recent tax changes. Spouses may want to defend the reason why they should not pay for maintenance or reduce the overall cost.
Until the first round of separations finalizes in 2019, it’s difficult to speculate on the exact response from couples going through a divorce. Luckily, there are resources to consult before determining alimony payments.