Last year, changes were made to the Internal Revenue Code, some of which took effect in 2019. One of the most debated changes involves alimony tax rules. Now that the changes are in place, Florida residents may be in for a few surprises when they file their 2019 taxes next year.
Up until last year, spouses who were ordered to make alimony or spousal maintenance payments to a former — or soon-to-be former — spouse could deduct the amounts paid from their income for tax purposes. Furthermore, recipient spouses were required to include these monies as income on their own taxes. Starting Jan. 1, 2019, the paying spouse can no longer take a deduction, and the recipient spouse is no longer required to report these payments as income.
If a couple finalized a divorce before the end of 2018, then they likely settled under the old rules. However, if agreements were modified after the end of 2018, and the terms of alimony payments were changed, then the current rules may apply. A modification before the end of 2018 would follow the previous rules. Any changes to a previous agreement would need to change the alimony amounts or terms, or specifically state that the new tax rules would be applicable before the 2019 tax code would take effect.
Spouses who have entered into an agreement that requires alimony payments likely have not yet felt the effect that these changes will have on their 2019 taxes. Alimony agreements are often a vital part of divorce settlement negotiations. In marriages where one spouse was the primary wage-earner, a divorce may have a devastating impact on the finances of a lower-earning spouse without the support supplied by alimony or separation support payments. Florida residents who are concerned about how their divorce will affect their financial stability may be best served by working closely with an experienced divorce attorney who can help them reach a satisfactory settlement agreement.