Going through a divorce in Tennessee can be a very confusing experience under any circumstances. Divorce matters can become even more confusing for our clients at Parker and LaDuke as the laws continue to change. During this transitional time, you probably want to pay close attention to the timeframe in which you have filed your documents. A new law is going to effect as of Jan. 1st, 2019 that could cost some people a lot more money in their divorce settlements because the rules about how alimony or spousal maintenance relates to your taxes are changing due to the Tax Cuts and Jobs Act of 2017.
According to BNY Mellon Wealth Management, the particular document you need to pay attention to is your written separation agreement. As long as this document is in writing and executed on or before Dec. 31st, 2018, the law will grandfather you in and the old rules governing alimony and taxes will apply, even if the divorce finalization does not occur until after the first of the year.
The rules regarding alimony and taxes have changed so that the recipient will no longer have to pay taxes on the money that he or she receives as alimony, while the payer will no longer be able to deduct alimony payments from his or her taxes. However, if you have filed your documents early enough, the new rules will not apply to you and you can continue to claim any alimony you pay to an ex-spouse on your taxes.
You should also be aware that, while some provisions of the Tax Cuts and Jobs Act expire after a certain amount of time, the rules regarding alimony are an exception. The only way the rules can change now is by another act of Congress. More information about the economic impact of divorce is available on our website.