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The tax consequences of alimony will change soon

To follow up on this blog's previous overview of how alimony works in Nebraska, dads in the Omaha area may want to think about whether it is to their advantage to come to an agreement about alimony quickly.

This is because, in about two months, after the end of the year, men who pay alimony will no longer enjoy the benefit of a deduction on their federal income taxes for those payments.

Dads who already have an agreement in place will be able to continue to take a deduction, but divorces and separations finalized after January 1 will not have a tax impact, at least when it comes to alimony.

This is good for those who receive spousal support since they will no longer pay tax on their alimony payments, but it is not so much for those, men and women alike, who are high earners and thus wind up paying alimony via divorce or separation decree. Starting in 2019, a dollar in alimony paid will be just that; there will be no corresponding tax savings.

This does not mean that men who are involved in a high-asset divorce should be in a rush to get to the courthouse, particularly if doing so is going to mean that they have to trade off other important legal rights and benefits. The net tax benefit of entering an alimony order now may not be worth, for example, giving up an additional share of the marital property. Whether to move quickly or hold off is really something best discussed with one's family law attorney.

Furthermore, at least some experts are predicting that judges may tend to lower the amounts of spousal support they typically order as they adjust for this new tax law and account for the fact that someone paying alimony will not enjoy a tax benefit.

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The Law Offices of James A. Adams, P.C., L.L.O.
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