How the New Tax Law Could Affect Your Rights/Responsibilities on Alimony
- February 2nd, 2018
- Family Law
One of the most discussed aspects of the new tax law just passed by Congress is how it will affect both parties in regard to a divorce where alimony is an issue. In that regard, get ready to strap your seat belts; the provisions of the tax law relating to alimony are not always clear.
What we do know:
First off, the new provisions of the tax law which relate to alimony affect divorces entered into after December 31, 2018. For those divorces entered into after December 31, 2018, the party in a divorce who is paying alimony will no longer be able to claim alimony as a deduction on their taxes (Under the old tax law, the spouse who was paying alimony could claim it as a deduction on their taxes, while the spouse receiving alimony would have to claim it as income.). For divorces entered after December 31, 2018, the spouse paying alimony will not be able to claim alimony as a tax deduction. Practically speaking, this means that Uncle Sam will in the future be getting a bigger portion of the marital divorce pie.
What we don’t know:
So, what happens when the parties to a divorce don’t actually get a divorce until after December 31, 2018 but have entered into an Order for Separate Support and Maintenance prior to that date? As anyone who has been divorced in South Carolina knows, unless there are fault grounds for a divorce, the parties must be separated for one year in order to obtain a divorce. In the meantime, parties often enter what is called an Order for Separate Support and Maintenance whereby all property and support issues, including alimony, are addressed. This is crucial where the parties are already living separate and apart, but one party is dependent on the other for support. So what happens if the parties entered into a Final Order for Separate Support and Maintenance prior to December 31, 2018 (and alimony was set at that time), but they don’t actually get a divorce until nearly a year later? The fact is that the new law does not address what happens in this scenario. Accordingly, it is now more important than ever that any agreement or Order for Separate Support and Maintenance entered into prior to December 31, 2018 be incorporated into the Final Decree of Divorce (at least, if you want to stand a chance of having the old tax laws as they relate to alimony apply). Of course, Congress and Uncle Sam (in their infinite wisdom) could always revisit this issue and determine a more finite solution to the above scenario to ensure they get the biggest piece of the pie in the quickest manner. Until then, make sure to discuss the new alimony provisions with your attorney and tax professional and how they may affect you if you wait until after December 31, 2018 to obtain a divorce. Spending the time now to determine how these issues may affect you will save you money in the long run.
So, how will the new tax law affect your business or corporation? Stay tuned for our next blog from corporate attorney Brian Miller for answers. And be sure to look out for my next blog on HBO’s series “Divorce.” What’s real and not in this exciting (and frighteningly accurate) show about a divorced couple navigating the legal system…and each other…
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