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The Impact of the New Tax Law on Spousal Support

tax law spousal support lawyer in connecticutCongress approved major tax reforms in 2017, and with these reforms, comes significant changes for those divorces that involve spousal support. Spousal support, because it can be a considerable expense for the payer and a significant form of income for the payee, is an important component of many divorces. The federal tax changes related to spousal support are significant, and it’s useful to take a closer look.

Tax Changes on the Horizon

In the past, the person who paid spousal support was able to claim the payments as a deduction on his or her federal taxes—whether the individual itemized or not—and the person who received the spousal support paid tax on the funds received. In this way, money paid in spousal support was usually taxed at the lowest rate—because the recipients of spousal support are presumed to be in lower tax brackets than the payers of spousal support.

Under the new tax law, the spouse who pays support will no longer be able to deduct the support payments on his or her federal taxes. Further, the recipient of that support will no longer need to claim the money as income. In other words, those who pay spousal support will no longer have a deduction, and those who receive spousal support will no longer have to pay tax on it.

Timing Is Everything

While the significance of this tax change can’t be overstated, it’s important to note the timing. Most of the new tax law took effect on January 1, 2018, but the spousal support component will not take effect until January 1, 2019. If your divorce decree is finalized before January 1, 2019, your taxes will not be affected.

The Rest of the Story

There are several important points related to the new tax law to keep in mind:

  • If you entered into your spousal support agreement before January 1, 2019, the old tax law applies.
  • If you modify your spousal support agreement on or after January 1, 2019, the new law will probably affect your modified payments.
  • Because the tax law benefits the ex-spouse who receives spousal support, there could be an increase in motions to modify spousal support. In fact, even a modification that ends in a reduction of support could benefit the recipient (because of the attendant tax break).
  • Because spousal support will no longer be classified as taxable income, recipients are more likely to be eligible for benefits based on income, including state and/or federal assistance and health insurance subsidies.

If You Have Questions about Your Divorce and the New Tax Laws, Contact an Experienced Connecticut Divorce Lawyer Today

Divorce is complicated, and tax laws are complicated—together, they can be overwhelming. At The Law Offices of Piazza, Simmons & Grant, L.L.C., in Stamford, Connecticut, our dedicated legal team is here to help. If your divorce will be finalized after January 1, 2019, or if you’re looking at a modification to your spousal support (whether you’re the payer or the payee), our family law attorneys can help you determine how the new law will affect you. Please contact or call us at (203) 348-2465 today.

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