A sweeping new tax overhaul may affect future divorce proceedings and will change the way individuals approach spousal support payments. Individuals interested in family law matters in Michigan may benefit by gaining an understanding of the new tax treatment of alimony payments. The changes have supporters as well as critics.
Under current law, alimony payments are tax-deductible for the person who pays. The person who receives the payment is obligated to claim the funds as income, and it is taxable. Under the new changes, the payments are no longer deductible for divorce judgments entered after 2018. Individuals currently in the divorce process will not be affected by the new law as long as the process is finalized before 2019.
Proponents of the tax changes say that the repeal will bring in additional tax revenue, and that it will eliminate a so-called divorce subsidy. Critics think the new law will make it more difficult to make payments because the payer will still lose income to taxes. Spousal support settlements may become smaller as a result, and individuals may be left with less of this type of support as they face a new uncertain financial future.
The new law will not change settlements in Michigan family law courts for at least a year, so individuals do have some time to prepare if they currently face a divorce. Part of settling a divorce is deciding how property will be split between the two parties. An individual may choose to hire a lawyer for help with legal and financial considerations.
Source: New York Post, “Here’s how the tax plan could change divorce in a big way“, Dec. 22, 2017