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Tax implications of alimony changing very soon

A previous post on this blog talked about how family law judge in Virginia can order one spouse to pay another alimony either while a divorce or separation is pending or following the entry of a final decree. As this post discussed, whether a spouse is entitled to alimony, and how much, depends on a number of factors that are ultimately within the discretion of the judge to evaluate.

Alimony may also be called spousal support since, as the name implies, it is supposed to ensure that a spouse who may otherwise face financial hardship on account of a divorce receives what he or she both needs and deserves.

It probably comes as no surprise to many Harrisonburg residents that most divorces, the vast majority, are actually not resolved by a judge making the final decisions. Instead, people work out their issues among themselves, and this includes whether and to what extent alimony will be paid.

In this respect, those who are at any stage of the process should probably be aware of an important tax change coming up with respect to alimony and federal income tax. This change could affect one's negotiation position when discussing alimony.

Now and through orders finalized by December 31, someone who agrees to pay alimony will ordinarily be able to deduct those payments from his or her taxes. On the flip side, someone who receives alimony must report that income.

Effective for orders entered on or after January 1, 2019, however, alimony has no tax consequences. A person who pays may not deduct those payments, and a person who receives alimony does not have to report it as income.

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