Divorce is a difficult process, regardless of how amicable the two parties may be and their resolve to work through divorce issues out of court. If you are facing a divorce in Kentucky, you may have the goal of reducing conflict and moving through the process as quickly as possible, but new changes in tax law could make that more difficult.
Recent changes in tax laws that will go into effect next year could signal big changes in the way that divorce orders address spousal support or alimony. Settling the financial aspects of a divorce could be more difficult than ever, even for a couple who wishes to avoid litigation.
What do these changes mean for you?
Current tax laws allow for the individuals paying spousal support to deduct the amount that they pay to their ex-spouses. This can be a bargaining tool in particularly contentious divorces, spurring on negotiations and helping reach a satisfactory conclusion. However, the new tax plan eliminates the tax benefits for payment of spousal support. This could mean the following for you:
- By eliminating the tax deductions of spousal support, a person will likely be less willing to negotiate paying larger amounts of money because he or she will not get any benefit from it.
- It could ultimately lead to lower alimony payments for the receiving spouse, as the other spouse will have higher taxes.
- Currently, the tax burden of alimony falls on the recipient, but that will reverse with new tax law changes going into effect.
People worry that, with less benefit to pay more support, battles between divorcing spouses could become more heated and more difficult to settle. While the tax laws do not go into effect until the next calendar year, you may find it beneficial to consider how these changes will impact you if your divorce will not finalize until 2019.
Your financial future after divorce
It is normal to have concerns about your financial stability after divorce. Whether you are the higher earning spouse or you think you could have a rightful claim to alimony, you may find it helpful to seek guidance as you walk through these difficult issues.
Divorce is complex, but it is possible to secure a stable financial future. If your divorce is already underway or you plan to file soon, it could be smart to be fully aware of how tax law changes could impact your post-divorce life.