As of January 1, 2019, under the new tax law, alimony must be non-taxable to the recipient and non-deductible by the payor. Prior to the new tax law being enacted, recipients were able to contribute their spousal support payments to the IRA’s. However, this is no longer a viable option because it will no longer be viewed as income. This is a similar concept to child support payments, which aren’t reported as taxable income.
Critics believe that the new law makes it more difficult for parties to obtain a divorce because the prior deduction was often used as a bargaining chip. As a result, the spouse paying alimony may not be willing to pay as high of an amount as before since they will need to pay taxes on it. It’s important to remember that the law isn’t retroactive and will not impact any current alimony agreements made prior to January 1, 2019.
If you’re concerned on how the new tax law will affect you, it’s important to contact an accountant and Florida Family Law attorney to discuss how the tax consequences will affect your case. The tax treatment of alimony is directed by the Internal Revenue Code, not by a divorce decree or marital settlement agreement. As such, it’s valuable to be cognizant on the IRS code.
If you have any questions or concerns, contact Young, Berman, Karpf & Karpf, P.A. Our attorneys are Board Certified by the Florida Bar Board of Legal Specialization and Education.