Getting Divorced Just Got More Expensive

Getting Divorced Just Got More Expensive

Effective for divorce agreements executed after December 31, 2018 or for agreements before December 31, 2018 and modified after that date, alimony will no longer be deductible by the payer nor will it be able to be included in the taxable income of the recipient.

Anyone planning or in the midst of a divorce should think about completing the agreement this year to avoid this disadvantaged tax treatment. The alimony deduction has always been seen as a bargaining chip as it would shrink any potential lump sum settlement since that does not receive preferential tax treatment.

Even happily married couples who have made prenuptial agreements should consider reexamination of those agreements if they contained clauses assuming tax deduction considerations.