What The New Tax Cuts and Jobs Act Means For Your Divorce! (Pt 1)

Starting in 2019, divorce agreements may be structured differently to account for the way alimony will be taxed


By now, many of you have heard about the Tax Cuts and Jobs Act that goes into effect at the start of 2019. So you know it’ll have an impact on many aspects of taxation, including cutting the corporate tax rate, the individual tax rate, and the income tax rate. It’ll also double the standard deduction and eliminates personal exemptions. But what effect could it possibly have on your divorce? Well, that’s a big one!


Let’s start with what the law says right now….


Under the current laws, anyone who pays alimony or separate maintenance can deduct an amount equal to that payment (the total paid for the year), as an “above the line” deduction, when they file their taxes. Not sure what that is? It’s actually pretty simple – an ‘above the line’ deduction is a deduction that taxpayers can claim without having to itemize them.


This part, however, is the most important bit… under the current law, taxes on alimony payments are paid by the person receiving them, NOT by the person paying them. In other words, alimony payments are tax deductible to the payer, and they must be included in the income of the spouse that received the alimony. But all of that is about to change!


In 2019, all of that will be different…


Beginning in 2019, there’ll be no deduction for the person paying alimony to a former spouse! Also, alimony won’t count as part of the recipient’s gross income anymore. Which means the payer can’t deduct it on their taxes as of next year.


On the flip side, the person receiving the alimony payments doesn’t have to claim that money as income. So they do not have to pay federal taxes on any alimony they recieve. In short, it doesn’t count as taxable income for the people getting alimony, but the people paying it still have to pay taxes on it. Amazed? You certainly aren’t the only one!


Does this change affect child support agreements as well?…


Many people are concerned about this, so if it was you’re first worry, then know that you’re in a large club! But thankfully, the answer is no! These changes are ONLY for alimony and how it’s taxed. It will have NO bearing on child support payments, or how they’re taxed.


Do you have questions about your alimony agreement in Michigan?


Family Law is not carved in stone. Laws change, and precedent affects the way Judges interpret the law. Plus, there’s the fact that laws are different from state to state, and even in different counties, certain situations can be handled differently. All in all, divorce can be a confusing process and there are many laws that affect the process. So it’s always best to get help from a skilled and experienced family law attorney.

At The Kronzek Firm, our respected family law attorneys help hundreds of Mid-Michigan families navigate their divorces. We have a proven track record of successful results in Michigan’s Family Courts, and we can help you too. So if you are considering divorce, or have questions about your alimony agreement, call 866 766 5245 today. We are here to help.