Until recently, the rule was that if you paid alimony payments in Florida to an ex-spouse, you had the ability to deduct the payments from your taxes, while the alimony recipient paid taxes on it. Though alimony laws varied from state to state, that was a universal constant. However, federal legislation that goes into effect in the new year will turn the old rules on their heads.
CNBC reports that the tax rules governing alimony payments will reverse when the Tax Cuts and Jobs Act takes effect on January 1st. Alimony recipients will no longer pay taxes on the payments they receive, and alimony payees will no longer be able to deduct alimony payments from their taxable income. The new rule only affects divorces that become finalized after Jan. 1st, 2019. Financial and legal experts are still unclear at this point how or if the new rules will apply to alimony settlements finalized prior to Dec. 31, 2018.
On the surface, it may appear that the new law benefits the alimony recipient. However, one expert argues that recipients actually stand to receive less money because the higher-earning spouse may argue that, without the tax deduction, he or she has less money from which to pay.
The change in the tax law as it relates to divorce may also result in more couples staying unhappily and unhealthily together because they cannot afford a divorce settlement. Conversely, it may also result in more divorce cases going to court instead of choosing mediation to reach a divorce settlement. The long-term effects of the new law are difficult to predict as legal experts are still scrambling to understand the changes themselves so as to best advise their clients.
The information in this article is not intended as legal advice but provided for educational purposes only.