Married Pennsylvania residents who are thinking about divorce should understand how the changes created by the Tax Cuts and Jobs Act could impact life after marriage. Certain provisions of the TCJA, specifically those that deal with child support and alimony, may make divorces more expensive for those who separate after 2018.
Starting Jan. 1, 2019, the manner in which alimony is taxed will change for new divorce filings. Divorcees who have to pay alimony will no longer be allowed to deduct the payments from their taxable income. Furthermore, alimony recipients will not be required to report the money they receive as part of their taxable income. This is a reverse of the current tax association with spousal support.
The change will make paying alimony more of a burden for future payers as they will not be able to benefit from the reduction in income taxes that comes with an income deduction. While it may seem that the recipients of alimony will benefit significantly from the tax law change by not having to report the additional income, it is likely that the amounts of alimony that will be awarded in the future will trend lower. This is because judges will no longer take the deduction benefits into consideration.
A family law attorney may work to ensure that a soon-to-be ex receives favorable settlement terms regarding alimony, child support and other divorce legal issues. The lawyer might take into account changes in the tax law that impact divorce and counsel the client regarding what type of settlement terms should be pursued.