New alimony rules

[Roberts]

Alimony deals entered into after Dec 31, 2018 will be taxed the same as child support. The payer will be taxed on what they pay, the receiver will not pay tax on what they receive.

 

This is not retroactive to previously entered into agreements.

 

[Terry D EA]

Correct! Perhaps a better explanation would be no tax deduction for the payer as child support payments are never tax deductible and child support payments for the recipient have never been included in taxable income. Now alimony works the same way only for agreements entered into after 12-31-2018.

[SaraEA]

EXCEPT if the alimony agreement is modified after 12/31/18.  Then it is subject to the new law.

[Jack from Ohio]

16 hours ago, SaraEA said:

EXCEPT if the alimony agreement is modified after 12/31/18.  Then it is subject to the new law.

I had not thought of that aspect.  Thank You for bringing it to our attention.

[jasdlm]

23 hours ago, SaraEA said:

EXCEPT if the alimony agreement is modified after 12/31/18.  Then it is subject to the new law.

Lawyers beware!  Under the current language, the modifications follow the old law if the modification agreement SPECIFICALLY references the same and says it shall be followed; otherwise, as SaraEA says, subject to the new law.  

[Catherine]

I am certainly NOT going to mind doing multiple scenarios (requested by the lawyers of divorcing clients) on the tax affects of alimony X, Y, Z, P, Q, and R.  I hate those.

[Roberts]

8 minutes ago, Catherine said:

I am certainly NOT going to mind doing multiple scenarios (requested by the lawyers of divorcing clients) on the tax affects of alimony X, Y, Z, P, Q, and R.  I hate those.

As a Certified Divorce Financial Analyst I LOVE those!!!!

[Catherine]

1 minute ago, Roberts said:

a Certified Divorce Financial Analyst

I'll send 'em to you!  I have found that they always want them yesterday, and want them for free.  Neither of which is acceptable to me.

[Roberts]

Just now, Catherine said:

I'll send 'em to you!  I have found that they always want them yesterday, and want them for free.  Neither of which is acceptable to me.

In reality my state is pretty stingy on alimony deals so they can be rather rare. Modifications are exceptionally rare and almost always involve one of the exes being physically disabled. I would think this rule is going to make modifications even more rare. After overcoming the tax increase and the attorney fees, the modification is going to have to be VERY substantial.