If you and your spouse have been discussing filing for divorce in Nebraska, it could be very important for you to understand how the newly enacted tax code changes may impact the settlement choices you make as well as how the timing of your final settlement might impact your choices. As explained by the American Bar Association Journal, since 1942 people who have made spousal support payments have been able to deduct these payments from their federal income tax returns. That is going to change starting January 1, 2019.
The ability to deduct alimony payments has long been thought to help make people required to make these payments more likely to agree to these terms. Now that they will be paying taxes on the money they pay to their former spouses, they may not be so willing to pay as much in alimony or even to pay it at all. This may have serious repercussions for the people who receive alimony.
Some believe the government’s aim in making this change was to increase tax revenue because the person who makes alimony payments is generally believed to be in a higher tax bracket than the person who receives it. Divorces finalized in 2018 will remain governed under the older law but any divorce agreement signed in 2019 or later will be bound by the new law.
If you would like to learn more about how the new Tax Cuts and Jobs Act might affect your impending divorce, please feel free to visit the spousal support and marital dissolution page of our Nebraska divorce and family law website.