If you are one of the many spouses in New Jersey who is considering whether or not to stay in your marriage or to pursue a divorce, you will want to know about how changes in the tax code might impact you differently this year than next year. Updates to tax laws, deductions and more are not unusual but the recently passed Tax Cuts and Jobs Act may have significant ramifications for divorcing couples.
As explained by CNBC, starting in January of 2019, a person who receives spousal support does will no longer need to report the payments as income on a tax return. This means that they will be able to receive the money with no associated tax responsibility as has been the standard for several decades now. Instead, the spouse who is ordered to make alimony payments must pay income taxes on the money. Up until now, payors of spousal support have been able to deduct these payments from their taxable income.
The change may well alter the outcome of divorce settlements as the ability to deduct alimony paid has been one small benefit to payors and may make people less likely to agree to these payments or may make them seek different terms.
If you would like to learn more about the various laws that may affect your divorce settlement and how to evaluate the tax implications of an agreement, please feel free to visit the marital dissolution and taxes page of our New Jersey divorce and family law website.