For those who may be on the hook for on-going alimony payments, the word "alimony" may seem like a dirty word. However, many overlook the tax benefit of classifying payments as "alimony" versus something different, such as a property distribution.
Alimony is currently considered a taxable event meaning the recipient of the alimony is receiving taxable income. The alimony as paid is tax-deductible to the paying party, provided the settlement agreement does not state otherwise. This has been in the tax code since 1942.
But buyer beware! Tax changes are on the horizon. "Because of the new tax law, spouses paying alimony won’t be able to take a deduction while spouses receiving alimony will no longer have to report it as income..." reports the American Bar Association. Come 2019, alimony will no longer be a taxable event, which means no more tax deduction and more money flowing to the government due to the payers of alimony mostly being part of higher tax brackets.
This blog post is not intended to provide readers with legal advice or tax advice in any way. This does not create a legal relationship or agreement between the reader and Bouchard Law, P.A. Bouchard Law, P.A. and its attorneys and staff do not claim to be experts in tax matters. Bouchard Law, P.A. recommends consulting a tax professional to fully evaluate your tax implications and consequences of your particular position.