When Minnesota couples decide to divorce, some of the most contentious issues on the table can be the financial matters. Alimony payments have been a particular source of conflict, often leading to extensive negotiations or ongoing court filings. The recently passed Tax Cuts and Jobs Act could have a major impact on how spousal support will be handled in divorces to come.
Federal tax law has had a uniform standard in relation to alimony for the past 75 years. Under these consistent rules, the former spouse who pays alimony is eligible for a tax deduction reflecting the amount of support paid. The former spouse who receives the alimony must report the payments and pay taxes on it alongside their other income. For divorces finalized after December 31, 2018, however, all of this will change. Alimony payers will no longer be able to deduct their payments from their taxes, and spousal support recipients will no longer need to report or pay taxes on the payments.
This is expected to lead to some significant changes in alimony calculations. Paying spouses may be more committed to resisting support orders altogether, and the total payment amount for a support order can be expected to decrease. While the recipient will be relieved of their tax burden, they may receive a significantly lower sum of money overall.
Some couples have been rushing to divorce lawyers in an attempt to beat the clock and finalize their separations before the end of 2018 and the effective date of the new law. A family law attorney can not only help to achieve a finalized divorce more quickly, but also protect a divorcing spouse’s rights — and assets — throughout the negotiation process.