When getting divorced, spouses in Maryland who may end up paying spousal support to their former partners will need to understand the potential ramifications of this agreement. The financial implications of paying alimony is about a lot more than how much money goes out of one’s bank account every month. As with other elements of a divorce agreement, there are tax consequences associated with these payments.
Exactly how taxes will be assessed on alimony payments is about to undergo a major shift in the United States. As explained by the Internal Revenue Service, for many decades now the person who has received spousal support has paid the income tax on that money. At the same time, the spouse who has made alimony payments has been able to deduct the amount from their individual tax returns. This has served as some form of consolation to payers of alimony over the years.
That, however, is all set to change as of January 1, 2019. MarketWatch reports that the new Tax Cuts and Jobs Act is going to reverse the responsibility for income taxes on alimony payments from the receiving spouse to the paying spouse. For people in the midst of a divorce now, if their decree is completed in 2018, the current law will govern their agreement. But, if their divorce is not finalized until even the first business day of 2019, that will all change.
Understanding the timing of a divorce and how much a spousal support agreement might actually cost someone is important when making a final decision for a divorce settlement.