If you keep up with the news, or if you have a good divorce attorney, you probably know by now that the changes made to the tax law in 2017 heralded the end of the tax benefits for those who will pay spousal support to their ex-spouse, also known as alimony. Beginning in 2019 spousal support (including child-support) will be treated essentially like a donation to a non tax-exempt organization, i.e. there will be no tax deduction available for the payor, and no taxable event for the receiver.
Many who have just started a divorce case or are in the early stages of your divorce are in despair over missing out forever on this benefit. Do not be discouraged, there is still time.
The tax law will become effective on all alimony obligations arising on or after January 1, 2019. The good news is that as long as the obligation becomes legally effective by December 31, 2018, it will enjoy the benefit of the tax deduction throughout the life of the legal obligation. The better part of the good news is that it applies to divorce settlements as well as adjudications.
Considering that partial marital settlement agreements are more than acceptable in Florida, a potential paying spouse could reach a settlement agreement on the issue of alimony only, and as long as the agreement is executed on or before December 31st. The payor would then enjoy the treatment of the old tax code and receive tax deductions for the alimony payments, even if they last for a lifetime.
This may be very advisable, even if the parties cannot agree at the time on the other marital issues such as custody, or equitable distribution of their assets and liabilities. Consult your tax advisor about the effect the loss of income without deductibility may have on your financial picture. If your case is not set for trial before December 31st, talk to your lawyer about an alimony agreement or a partial marital settlement agreement. If not, you may miss out on the chance of a lifetime.