Racing to complete a divorce is hardly what most people in Wisconsin might think of doing. Instead, much care and often time is required when figuring out how to split a marital estate. This year, however, that may be very different due to a big change in the federal tax code that is set to take effect on January 1, 2019.
In marriages where one person might end up paying spousal support to the other after a divorce, the consequences of an agreement will look very different in just a matter of weeks. For multiple decades, it was the receiving spouse’s responsibility to make income tax payments on alimony. As Bloomberg notes, that will all change as it will be the paying spouse’s responsibility to make income tax payments on alimony.
The tax change is part of the Tax Cuts and Jobs Act that was passed earlier this year. In addition to paying taxes on money given to a former spouse, a person will lose the tax deduction they would enjoy should they manage to get their divorce completed in the 2018 calendar year. It is for this reason that many couples are believed to be working furiously to achieve a final settlement before the calendar changes to a new year.
Once 2019 commences, negotiations in divorces will likely change as the tax structure for spousal support payments often facilitated agreements on how much would be paid and for how long payments would continue. The willingness to make such payments will not be as great once the new law takes effect.