Divorce & Family Law Column By:
Chadwick M. Layton, Esq.[i]
Harvey Waddell & Layton, P.A.
ALIMONY UPDATE UNDER NEW TAX CODE
Analysis of how the major tax overhaul will change alimony awards continues to be a hot topic for divorce attorneys and individuals facing divorce.
The timeline as to when the new tax laws on alimony will go into effect has been defined. The tax cuts and jobs act signed into law on December 22, 2017 will be effective as it pertains to Alimony starting in 2018. This means that divorce and separation agreements signed after December 31, 2018, will be subject to the new alimony tax law.
The next questions then becomes, what is the new alimony tax law and how does it apply to my situation? The new tax treatment of alimony provides that the Payor of alimony will no longer be able to deduct their alimony payment. Conversely, the Payee (party receiving the alimony payment) will not pay taxes on the alimony payment received.
This seachange in the tax consequences of alimony payments incentivizes the completion of divorce settlement agreements before December 31, 2018. Additionally, in instances where an agreement cannot be reached between the parties, a trial date and final judgment of dissolution from the court before December 31, 2018, will be extremely beneficial to many professionals that are facing a divorce.
The changes to the tax code regarding alimony will undoubtedly change the manner in which alimony claims are negotiated in divorce and ultimately tried in the courtroom. However, the initial inquiry for alimony claims will not change, which is whether or not there exists a need for financial support by one spouse and the ability to pay by the other spouse. Additional factors include the standard of living established during the marriage, length of the marriage, ability of each spouse to earn going forward and traditional roles of each spouse during the marriage.
[i] Chadwick M. Layton is a partner and shareholder at Harvey Waddell & Layton, P.A., located in downtown Lake Worth, he is also a member of the Florida Bar Family Law Section and the Susan Greenberg Family Law American Inn of Court of the Palm Beaches, further information is available at www.LaytonLawOffices.com or (561) 585-4631.