New tax law reverses which spouse pays taxes on alimony


Arizona couples considering divorce may want to act fast to take advantage of a big tax deduction.

Anybody who is in an unhappy marriage and considering getting divorced may have more of an incentive to do so before 2019 rolls around. That’s because, as USA Today reports, after December 31, 2018 those paying spousal maintenance (also called alimony) will no longer be eligible for deducting those payments on their federal tax returns. The change is thanks to the sweeping tax reform bill, called the Tax Cuts and Jobs Act, that was passed by Congress and signed into law by President Trump late last year.

Tax obligations will reverse in 2019

Currently, people who are paying spousal maintenance are able to deduct those payments on their federal taxes while the recipient of those payments must declare them as income for tax purposes. The rationale for this tax arrangement is that it isn’t fair that people who are paying alimony should be forced to pay taxes on money that they don’t actually get to use.

With the new tax law, however, these tax obligations will be reversed. Beginning on January 1, 2019, those paying spousal maintenance will no longer be eligible for a federal tax deduction on those payments. Recipients, meanwhile, will no longer be required to pay taxes on any spousal maintenance they receive.

A bigger burden for both spouses?

While no longer having to pay taxes on spousal maintenance may sound like a “win” for recipients, the opposite could in fact be true. That’s because the current spousal maintenance tax deduction that payers currently take advantage of ultimately benefits recipients. Spousal maintenance payers tend to be in a higher income bracket than recipients, so a tax deduction for payers tends to equal more money than what recipients currently have to pay in taxes on spousal maintenance. The deduction gives payers more flexibility in how much they can pay in maintenance. Without that big tax deduction, payers are likely to be less flexible in negotiations for how much spousal maintenance they are willing to provide an ex-spouse.

The change means that couples who have already decided they want a divorce should move quickly this year in order to take advantage of the tax deduction while it is still around. As AZ Big Media reports, Arizona couples should keep in mind that, when filing for divorce, they will have to complete a 60-day “cooling off” period before they can file their divorce agreement. That means that in order to take advantage of the alimony tax break, it is best to act especially quickly.

Family law help

Divorce isn’t easy, but it can be an opportunity to begin life anew. However, being prepared for post-divorce life means having a divorce agreement in place that will best protect one’s long-term interests. A family law attorney can help those who are going through a divorce negotiate an agreement that will better set them up for success in the years ahead.