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Alimony, divorce and the new tax law

While many locations have seen a drop in the divorce rate recently, 2018 may prove to be the exception. With the changes to alimony created by the new tax law, people who may be contemplating a divorce in Georgia may decide to follow through with the idea. The new law changes how alimony is treated for tax purposes.

Under the old law, the person paying alimony was able to deduct that amount from his or her tax liability. The person receiving the alimony paid taxes on it as income. The person receiving the alimony may be taxed at a lower rate. Under the new law, which takes effect on Jan. 1, 2019, the person paying the alimony will no longer be able to deduct it and will have to pay taxes on the income. The person receiving alimony will not have to pay taxes on that amount.

While this may sound like a positive outcome for the person receiving alimony as his or her tax liability will go down, a positive outcome may not be the result. The person paying alimony must pay tax on more money and so may feel there is less money to go toward alimony. Under the old law, if the person paying alimony is in the top tax bracket and is paying $100,000 in alimony, it may cost that person only $50,000 after the tax deduction. The recipient gets the $100,000 and pays $25,000 in income tax, netting $75,000. Under the new law, there is no tax break for the payer, so the payment may go down to $50,000, and though the recipient pays no tax, the recipient may be left with $25,000 less than in the previous scenario.

In considering the implications of the new tax law on divorce in Georgia, a person contemplating a divorce could benefit from seeking the counsel of an experienced family law attorney. Divorce is typically complicated, and the new law may bring new challenges. A knowledgeable family law attorney may be able to assist in navigating those new challenges.

Source: news4jax.com, "'Races to courthouse' expected before new alimony law takes effect", Nikki Kimbleton, April 3, 2018

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