Upcoming changes to the tax treatment of spousal support may provide motivation for Texas residents to end their nuptials before the start of 2019. This is because alimony will no longer be considered income to the person receiving it and a tax deduction to the person providing it. While not having to pay taxes on alimony may seem like a positive, it could actually limit the amount of support offered.
Furthermore, since spousal support will no longer be considered income, funds received cannot be used to contribute to an IRA or 401(k). It is also important to remember that the personal exemption has been eliminated until at least 2025. This means that a parent can no longer claim additional exemptions based on how many kids they have. However, claiming the children may be beneficial as it might entitle a person to other tax credits.
If a divorcing couple has a prenuptial agreement, it may be necessary for each person to have that agreement reviewed by an attorney. The reason is that it could have language related to alimony that might be rendered moot by the tax law changes.
There are many divorce issues that could arise because of changes to the tax code. Those who believe that they are entitled to spousal support in a divorce may wish to consult an attorney in the near future. Legal counsel could further explain the potential tax treatment of these payments and help plan a strategy for garnering a fair settlement. Having this legal guidance may allow an individual to work toward a favorable outcome in a divorce case.