The Tax Cuts and Jobs Act reportedly caused a flurry of activity in Maryland divorce courts and others around the county at the end of 2018. Among its many provisions, major changes were made to the way alimony was to be handled for federal income taxes beginning in 2019. Matrimonial lawyers stated that the change prompted many couples to finalize their divorces so that they would be grandfathered under the old law. While the new provision is now in place, some tax experts have suggested that individuals need to also take a look at how alimony is viewed for their state income tax purposes.
Many Maryland couples and others all around the nation will soon be ringing in the new year on Jan. 1, 2019. While a time for celebration, it will also be a time for change for those divorcing couples who have yet to make alimony or spousal support arrangements. A new law will go into effect that day that has major implications on the taxation of alimony payments prospectively.
The Tax Cuts and Jobs Act was passed roughly a year ago and several changes were instituted at the beginning of 2018 for Maryland taxpayers and others around the country. However, one significant revision will be effective until the year is over. Alimony will be taxed differently after the new year and this could cause a rush of activity to get divorces finalized before year end.
Going through a divorce can often be a lengthy process for couples in Maryland and others around the country. They must address a multitude of issues as they work toward separating the various aspects of their lives. Though a divorce is not something that should be rushed, many experts have suggested that those contemplating a divorce should consider finalizing it in 2018. The impetus behind this suggestion concerns the new way alimony will be treated for tax purposes, beginning next year.
New changes to tax deductions with the Tax Cuts and Job Act are set to begin on Jan. 1, 2019. All divorce agreements executed by Dec. 31, 2018 will reap the benefits of tax deductions on alimony, but those agreements settled after Jan. 1, 2019 will lose out. Recipients of alimony in Maryland and other states will begin to receive payments tax-free.
On December 31, 2018, The Tax Cuts and Jobs Act goes into effect, eliminating the coveted tax deduction for alimony. Divorces completed before the end of the year will be grandfathered into the old law, where the payer will receive the tax deduction and the payee will be taxed. Residents of Maryland and other states could use Individual Retirement Accounts as bargaining chips in lieu of alimony payments.
Facing a divorce can be intimidating, especially if one's financial future is uncertain after separation. Many Maryland couples seeking a divorce will consider the option of having the higher-earning spouse pay alimony to the spouse who may not have worked or did not make as much money. After a relationship dissolves, alimony can bring a sense of stability for the recipient. However, one woman in another state decided to take matters into her own hands, opting for murder-for-hire instead of working through a financial agreement.
Divorce can be complicated, especially if a couple cannot come to an agreement in regard to alimony payments. To further complicate matters, a tax change is on the horizon that will potentially cause drawn-out divorces and contentious disputes. Maryland couples considering a divorce may want to contact an attorney to finalize matters in 2018 to avoid being locked into the new alimony tax law.
The recently enacted Tax Cuts and Jobs Act is likely to affect most Maryland residents and others around the country. The law changes how child credits, standard deductions and many other items are considered when doing one's taxes. One significant change regarding alimony will have a major impact on those going through a divorce after the end of 2018.
When going through a divorce, the court considers many aspects such as child custody and support, property division, and the stipulations of any prenuptial agreements that may exist. In some cases, a spouse may be required to provide spousal support to the spouse who earns less after the divorce in order to eliminate any unfair economic limitations. Before requesting alimony, it is important for Maryland residents to understand how these payments are calculated.