Collaborative Divorce Texas

  • Donate
  • For Professionals
    • Membership Advantages
    • Events/Training
    • Become a Member
    • For Students
    • Volunteer at CDT
    • Advertise With Us
  • Contact Us
  • Login
  • Home
  • Find a Collaborative Professional
  • What is a Collaborative Divorce?
    • What is Collaborative Divorce?
    • Frequently Asked Questions
    • About CDTexas
    • Master and Credentialed Collaborative Divorce Professionals
    • The Gay G. Cox Award for Excellence in Collaborative Law
  • Blog
  • For Collaborative Professionals
    • Membership Benefits
    • Events/Training
    • Become a Member
    • For Students
    • Advertise With Us
    • Volunteer at CDT
    • Login
  • Donate
  • Contact Us
  • What is Collaborative Divorce?
    • What is Collaborative Divorce?
    • Why Use a CDTexas Member?
    • About Us
    • Master and Credentialed Collaborative Divorce Professionals
    • The Gay G. Cox Award for Excellence in Collaborative Law
  • Testimonials
  • FAQs
  • Blog
  • Find A Professional
    • How Do I Choose a Collaborative Professional?
    • Attorneys
    • Financial Professionals
    • Mental Health Professionals
    • See All

Donate

You are here: Home / Blog / Spousal Maintenance and Alimony won’t be Deductible in 2019

Spousal Maintenance and Alimony won’t be Deductible in 2019

January 12, 2018 By Harry Munsinger, J.D., Ph.D. Leave a Comment

Under current IRS law, spousal maintenance and alimony are deductible by the paying party and must be reported as income by the receiving party.  This arrangement is advantageous to couples going through a divorce and planning to include spousal maintenance or alimony in their property settlement because the higher earning spouse is paying taxes at a higher rate than the receiving spouse.  The higher earning spouse may deduct the spousal maintenance or alimony payments on form 1040 at a high tax rate while the lower income spouse, who received the payments, reports the income and pays tax on the spousal maintenance or alimony at a lower tax rate.  This IRS rule allowed a divorcing couple to share the cost of spousal maintenance or alimony with the federal government.

However, under the new tax plan passed in late 2017, spousal maintenance or alimony payments will no longer be deductible by the payer and not need be reported to the IRS as income by the receiving spouse after January, 2019.  Thus, the date when your clients finalize their divorce will have a significant impact on the cost of spousal support or alimony under the new tax plan.  If your client is the higher earning spouse in a divorce and the divorce settlement involves alimony or spousal maintenance, you should advise your client to finalize his or her Divorce Decree and Agreement Incident to divorce before December 31, 2018 if your client wants to deduct spousal maintenance or alimony payments from his or her reported income.  Under the old tax law, because the spouse receiving alimony or spousal maintenance is usually in a lower tax bracket after a divorce, more money stays with the divorcing couple rather than going to the Federal Government.

Starting in 2019, spousal maintenance or alimony deduction will no longer be tax deductible.  Under the new tax law, the higher earning spouse will be required to pay all of the tax on the funds used to pay spousal maintenance or alimony and the recipient will get the payments tax-free.  If one of your clients expects to receive spousal maintenance or alimony as part of a divorce settlement or court order, you may want to delay finalizing that client’s divorce until the beginning of 2019 so  he or she won’t have to pay tax on the alimony or spousal maintenance payments.  However, the interactions between divorce settlements or orders and the tax code are complicated.  It’s likely couples will negotiate a settlement that takes into account the loss of the spousal maintenance or alimony deduction after December 31, 2018.  When negotiating a divorce settlement in 2019 or later, the new tax rule on alimony and spousal maintenance can be factored into the settlement by reducing the amount of alimony or spousal maintenance the paying spouse must send to compensate for the loss of the prior tax deduction.  Thus, under the new tax rules, less alimony would likely be paid to correct for the loss of the tax deduction by the higher earning spouse.  However, because more taxes must be paid to the Federal Government, the couple will end up with less assets to divide.  This is a significant development in family law, because during 2015, approximately 600,000 couples used the alimony deduction on their federal tax returns.

Under current tax law, alimony or spousal maintenance is deductible by the person paying, while the recipient must report the payments as income on his or her tax return.  Starting in 2019, the payor gets no deduction for spousal maintenance or alimony payments and the recipient need not include the payments as income on his or her tax return.  However, the interactions of tax and divorce law are complex and spouses paying alimony or spousal maintenance will most likely negotiate lower payments to compensate for the loss of the tax deduction.

About Harry Munsinger, J.D., Ph.D.

Harry Munsinger practices collaborative and estate law in San Antonio. He has over twenty years experience resolving disputes involving divorce, probate, wills, and trusts. Harry was an adjunct law professor at the University of Texas and St. Mary’s University. He has published several textbooks and over forty psychological and legal articles. Harry has been a forensic psychology expert, a licensed psychologist and a litigator.

Filed Under: •••, Blog, Harry Munsinger, Our-Featured-Authors Tagged With: alimony, new tax law, spousal maintenance

Leave a Reply

Your email address will not be published. Required fields are marked *

Find a Professional

Getting started with the Collaborative Process?

First your need to connect with a trained Collaborative Professional.

[Find Out More....]

Articles by Category

Featured Video

  • Child of Divorce
  • Collaborative Divorce Testimonial

Why Collaborative?

  • Jennifer Leister
  • Steve Walker
  • Carla Calabrese
  • Dawn Budner
  • Becky Davenport
  • Jody Johnson
  • Honey Schef
  • James Urmin
  • Kurt Chacon
  • Natalie Gregg
  • Robert Matlock
  • Deborah Lyons
  • Carlos Salinas
  • Camille Scroggins
  • Linda Solomon
  • Richard Soat
  • Lisa Rothfus
  • Jeffrey Shore
  • Barbara Cole
  • David Brunson
  • Jennifer Tull
  • Syd Sh
  • Susan Z. Wright
  • Christi Trusler
  • Camille Milnser
  • Linda Threats
  • Sarah Keathley
  • MaryAnn Kildebeck
  • David Bouschor
  • LIsa Marquis
  • Harry Munsinger
  • Vicki James
  • Robin Watts
  • Katie Berry
  • Jack Emmott
  • Jennifer Broussard
  • Patricia Havard
  • Paula Locke Smyth
  • Laura Schlenker
  • Norma Trusch
  • Brett Christiansen
  • Tim Whitten
  • Mickey Gayler
  • Melinsa Eitzen
  • Julian Schwartz
  • MaryAnn Knolle
  • Chad Olsen
  • Chris Farish
  • Charles Quaid
  • Anne Shuttee
  • Barbara Runge
  • Rhonda Cleaves -
  • Jamie Patterson
  • Catherine Baron
  • Kristen Algert
  • Sandra Roland
  • Rhonda Cleaves 2
  • Gratia Schoemakers

Have you read?

5 Keys to Financial Planning for Divorce

No one expects to get divorced when they marry, but half of all American marriages end in divorce.  Because Texas is a community property state, all marital property is divided during a divorce.  … [Read More...]

More Articles from this Category

The Collaborative Law Institute of Texas

d/b/a
Collaborative Divorce Texas

Proud Members of IACP

1400 Preston Road
Suite 400
Plano, TX 75093
(972) 386-0158

Please note: Our office will be closed on

Holiday closures:
Limited: Nov. 23rd & 24th
Closed: Nov. 25th , 26th and 27th

Christmas:
Closed from December 24-December 30, 2022.
Offices open on January 2nd, 2023.


Website Terms of Usage

Contact Our Webmaster

 

Follow Us

  • Facebook
  • LinkedIn
  • Twitter
  • Vimeo
  • YouTube

Search Our Website

Find A Professional

  • Find a Collaborative Professional
  • Attorneys
  • Financial Professionals
  • Mental Health Professionals
  • See All
EnglishFrançaisDeutschItalianoPortuguêsEspañol

Copyright © 2023 · Collaborative Divorce Texas · All Rights Reserved

· · ·

Web Design and Maintenance by The Crouch Group