For those looking to get divorced in 2019, there are some changes to the law that you may want to keep in mind. Did you miss the window to file in 2018? If so, here is what you need to know.
Call Five Points Law Group today if you need help understanding the changes to the law or just want help getting your divorce finalized. We have years of experience helping people throughout Birmingham, and we might be able to help you, too.
New Tax Rules Effective January 1, 2019
Up until the clock struck midnight on December 31, 2018, alimony was a tax-deductible expense for the payor. This made a lot of sense, actually, because it is money the payor was court-ordered to give to someone else outside of his or her household and it did nothing to benefit the payor. It lightened the burden of an alimony payment to some extent.
As of this year, however, alimony is no longer tax-deductible. Under President Trump’s new tax law passed in 2018, starting with 2019 tax year, alimony loses its deductible status entirely, making it even harder on those paying alimony. Why the change? Well, previously alimony was considered taxable income for the recipient, meaning it was still taxed, but usually at a lower amount. Consider the fact that the alimony payor is almost always the person making more money. Therefore, in most cases that person has a higher effective tax rate. Take this example:
A man making $100,000 is ordered to pay $1,500 in alimony per month to a spouse who earns just $40,000. The higher earning spouse will be taxed on his full income at the higher tax rate, yet the lower earning person will receive the money tax-free. Previously, the IRS was taxing the lower-earning party at a lower tax rate. In the end, the winner here is the IRS.
Permanent Alimony is Out…Sort of
Back on April 13, 2017, the Governor passed HB 257, which essentially gave courts a strong instruction not to award permanent alimony (also known as “periodic alimony”). Under the new law, the court is not to award alimony for more than five years without giving a written explanation for the extraordinary reasons why the judge feels the recipient could not successfully rehabilitate and take care of him or herself. The major exception is where the marriage has lasted more than 20 years.
Speak to a Lawyer Early in Your Divorce
Many people think you should only go to a divorce attorney once you have made the definite decision to get a divorce, but this may actually be a bit late. Instead, if you are having concerns or questions about divorce, it is probably time to engage in a fruitful discussion with an attorney near you.
At Five Points Law Group, we can provide insights and updates on the most recent laws and policies that may affect you. Keep in mind that each person’s situation will be entirely unique, so talking to a lawyer can be a helpful part of the planning process. You may ultimately decide divorce is not right for you, but it is impossible to make good decisions without good information. Call today and speak with an experienced divorce lawyer.