When a couple in Michigan or elsewhere around the country get a divorce, the issue of alimony or spousal support is likely to be addressed. For the past 75 years, alimony was taxed a certain way for the payer and the recipient. However, the new tax law that was approved late last year changes how alimony will be taxed. Family law experts predict that these changes will affect how divorces will be handled during the remainder of 2018.
Currently, the person making alimony payments can deduct the amount from taxable income. This has resulted in benefits to both parties in the divorce. The person paying could agree to a higher amount of alimony since it could be deducted. In turn, the recipient got a higher amount of support. Though the recipient paid taxes on the amount, he or she was typically in a lower tax bracket.
With the coming change, the person paying alimony will be taxed on a higher amount of income. Unfortunately, divorce settlements may include lower alimony payments. Experts believe that both parties will suffer with the new tax situation.
The changes to the alimony taxation will go into effect on Jan. 1, 2019. Matrimonial law advisers anticipate that many couples will attempt to finalize their divorces before the end of 2018. Going forward, experts hope that the new situation will not create more animosity between the ex-spouses, particularly if there are children involved.
To ensure that someone understands the implications of the new tax law and how it may affect a divorce, it would be beneficial to contact a Michigan family law attorney. A lawyer can discuss the tax law and all the other issues surrounding a divorce and recommend how best to proceed. A knowledgeable attorney will help clients navigate the divorce process and work toward achieving a positive outcome in the proceedings.
Source: Chicago Tribune, "What could make divorces more contentious? The new tax law", Ally Marotti, Feb. 22, 2018