Couples who decide to file for divorce in Texas may be ordered to pay alimony as a part of the divorce settlement. Alimony is designed to help people who are dependent on their spouse’s income, to get on their feet, make ends meet and maintain a certain quality of life once the divorce is finalized.
The Tax Cut and Jobs Act, which will take effect in 2019, will affect the way people deduct their alimony payments from their income taxes. Currently, people who pay alimony to a former spouse are able to deduct their payments from taxes, and the people who receives the alimony payments are responsible for paying taxes on that money. Under the new change, however, alimony is not deducted and recipients are no longer required to pay taxes on the money received.
People should keep in mind that the new alimony rule only affects couples who divorce in 2019, once the regulations take go into effect. One way people can implement the new rule is by paying their spouse’s alimony out of their IRA. The money is taken out of the retirement account, which are funds that are untaxed, and then used as an alimony payment. The recipient of the alimony must pay taxes on that money, as they did previous to the new law.
Filing for divorce may seem overwhelming, but an attorney from Texas can simplify the process. They can sit down with you and explore all of your legal options, as well as help you make the right choice for your situation.
Source: CNBC, “Two surprising ways the new alimony tax rules affect your retirement savings,” Lorie Konish, Aug. 14, 2018.