Currently, individuals who pay Alimony as a part of a divorce settlement are able to deduct that income from their year-end taxes and the recipient must then claim the income on their taxes. This is about to change. As a part of the recent sweeping tax law change from the “Tax Cuts and Jobs Act” any Alimony due from a divorce settled AFTER December 31, 2018 will not longer be deductible to the payor. In addition, the recipient will NOT have to claim it as income. This has huge implications for both parties. Usually, the individual ordered to pay alimony is in a higher tax bracket than the individual receiving alimony. Therefore, the payor will be effectively giving tax-free income to their former spouse while they remain in or move to a higher tax bracket as a single individual. If you are involved in a lingering divorce, discuss these tax consequences with your attorney. If it looks like your divorce cannot be settled in 2018, renegotiate your alimony as you will be shouldering the income tax for all involved.
Tax prepartion services offered by Artisan Financial Group are separate and unrelated to Commonwealth.