It’s 2019 and that means the Tax Cuts and Jobs Act will be affecting how you file your 2018 tax return. One of the many changes that were made by the new tax reform is to Alimony payments and the deductions. We wanted to talk to you about the changes because you may have heard that Alimony is going away– well the answer is yes and no. Here is what you need to know.
The Tax Cuts and Jobs Act of 2017 brought along many changes and the changes made to Alimony is one that has had mixed reviews from taxpayers. To start, Alimony is defined as an allowance made to one spouse by the other for support pending or after legal separation or divorce. A common misconception is that payments for vehicles, bills, and/or additional cash can be taken as alimony. This is not the case; alimony is very specific and must fall within the accepted guidelines. Before the Tax Cuts and Jobs Act, payments that met the tax law definition of alimony could always be deducted by the payer for income tax purposes. Recipients of alimony payments also always had to report the payments as taxable income. The Tax Cuts and Jobs act will affect all divorces that are enacted after December 31st 2018. If your divorce is finalized after December 31st, 2018, you now will have new rules. If you are a payer of alimony, you will no longer get to deduct alimony payments from your taxes. If you receive alimony, you don’t have to include them as taxable income. This will hurt taxpayers who pay alimony as they lose out on deducting a large amount from their taxable income. If your divorce was finalized by the end of 2018, you will not have to worry about the new rules.
A payment is considered alimony if the following requirements are met. The taxpayers cannot file a joint return together, the payment must be in cash, check or money orders, the payment is to or for a spouse or former spouse under a divorce or separation instrument. The divorce must also designate the payment as alimony and the spouses can’t be members of the same household. The payment may also not be treated as child support or a property settlement.
If you need help navigating all the new changes made by the Tax Cuts and Jobs Act, Polston Tax can help! Our team of tax attorneys and tax accountants have read and studied the new tax law and we know how each change can affect you. Give us a call today at 844-841-9857 or click below to schedule your free consultation.