On behalf of Sparkman Law Firm posted in Business Law on Wednesday, February 12th, 2018.
Trump’s new tax plan means changes for everyone, from Fortune 500 businesses to the individual. While the plan has many implications, one that Florida divorcees should pay attention to is its impact on alimony payments.
How the Current Tax Code Affects Florida Alimony
Under the current tax laws, alimony payments are deductible by the payer and the recipient must claim those payments as a portion of their taxable income.
Essentially, this “lessens” the cost of alimony for the payer and “increases” the cost for recipients by lowering and increasing the annual tax obligation respectively, bringing a little more balance to the equation. Any money saved through this tax “loophole” so to speak can be kept by either the payer or the recipient, or they can share it.
How Trump’s New Tax Plan Affects Florida Alimony
President Trump’s new tax plan eliminates much of the complication of how alimony is calculated for tax purposes at this time. However, it unfortunately also eliminates the potential benefits.
Under the new plan, alimony will no longer be deductible by the payer and the recipient cannot claim those payments as a portion of their taxable income. This means that alimony tax savings will no longer be available for divorcees — however, those who divorce before the effective date (December 31st, 2018) can retain the current tax treatment of alimony.
Should You Finalize Your Divorce Now?
If you are already divorced, the new tax plan won’t apply to you unless you modify your judgment and both parties agree to opt into the new plan. However, if you are in the process of divorcing and the old tax treatment will be more beneficial for you and/or your soon-to-be-ex, it would be wise of you to consider finalizing before the new laws take effect.
You may decide that the new tax plan may not be more beneficial to your ex, but would be for you. In that case, it may be in your best interest to wait to finalize your divorce until after the end of the year.
A Note About Separation Instruments
Florida does not have a legal definition of binding separation instruments, so it is unclear how the new tax code will apply to Florida’s current laws. Certain legal agreements may come into play, such as prenuptial or postnuptial agreements, but cases without written agreements may become the subject of intense litigation in 2019.
Need to Know How the New Tax Laws Will Affect You? Contact a Lawyer Today
Whether you are currently divorced or separated, are in the process of, or are simply considering it, Trump’s new tax plan has the potential to affect you significantly, particularly if you’re looking at requesting alimony or having to pay it.
At Sparkman Law, we are up to date on the latest changes to laws that affect families and can provide the guidance you need to make important decisions in the upcoming year. Contact us now for a consultation to discuss your case at (813) 374-2000.