Paying alimony can be a cumbersome undertaking for someone who is trying to start their life over after ending their marriage. In Washington and other states throughout the country, payers of alimony have been allowed to deduct the money that they pay to their former spouse from their taxable income and therefore lower the amount of money that they must pay in taxes each and every year. However, in 2018 the federal government passed a huge overhaul of the tax system, and part of that overhaul addressed how alimony payments will be dealt with in the future.
Beginning in the new year, alimony payments will no longer be tax deductible. That means that a person may not reduce their taxable income by the amount of money that they provide to their former spouse through support payments. In addition to losing income to payments, a payer will also be on the hook for the taxes that apply to that money from having earned it themselves.
Any individuals who have alimony agreements in place will not be affected by this change in the law, and anyone who finalizes their alimony agreement prior to the end of the year will be grandfathered into the prior process of allowing for tax deductions.
It is therefore important for individuals who are working through their divorces to understand that this potentially detrimental financial deadline is coming up in only a matter of weeks. For those who wish to protect their option of deducting alimony payments from their taxable incomes, finalizing alimony agreements should be a priority for them in the next month.