When Texas couples go through a divorce, one of their main concerns is what will happen to their financial future. If you have money concerns, you are not alone. Most people will have to make adjustments, change plans and get used to new circumstances. This is true for each spouse, especially in cases where there will be spousal support paid from one spouse to the other.
Tax laws affect everyone, and new changes to these laws could specifically impact divorcees who are receiving and paying alimony. Before agreeing to the terms of a spousal support agreement or making choices that could affect your future, you will want to take these laws into consideration. Failure to consider changes could result in financial hardship and unexpected tax obligations.
What do these changes mean for you?
Spousal support, also called alimony, is a legal obligation for the high-earning spouse to make payments to the other. The intent of these payments is to offset the economic inequity brought about in many divorces. In the past, the spouse making these payments could deduct them from his or her taxes, but that is no longer the case. Consider the following about the ways the Tax Cuts and Jobs Act could affect you:
- The person making alimony payments can no longer deduct these amounts from his or her taxes.
- The person who receives these payments no longer has to report them as income for tax purposes.
These changes affect divorces finalized in 2019 or later. The law states that in order for them to apply, the order must be in writing, payments paid by one spouse to another and be specifically designated as alimony. This does not apply to child support payments or other money you may receive from or pay to your spouse as part of your financial settlement. There are tax implications for virtually every financial decision made in divorce, and it’s crucial to think long-term.
Your future interests at stake
If you are going through a divorce, there is a lot on the line for you. Your financial interests are at stake, but you do not have to navigate these sensitive and complex issues on your own. An assessment of your case can help you understand your options and allow you to pursue a final divorce order that will provide you with stability and security for years to come.