Laura Dale & Associates, P.C.
Se Habla Español Nous Parlons Français
Call 713-574-7952 or 888-572-6059

A new tax strategy for alimony in a high-asset divorce

The overhaul of the U.S. tax code brought a radical change for many Americans, especially those who filed for divorce after Jan. 1. One of the most significant changes is how alimony is taxed. The new law no longer allows the paying spouse to deduct the payments, while the receiving spouse does not have to claim it as income.

Divorce can be a harsh emotional experience for a family, especially when it gets down to the basics. When couples split, their main concerns are their assets, child support and parenting time with their children.

The new tax code has a significant impact

Prior to 2019, a spouse earning $300,000 and paying a third of that in alimony could deduct the full $100,000 and still have an income of around $157,000 after taxes. However, under the new tax code, the paying spouse's income is nearly $35,000 less.

The receiving spouse would have paid more than $15,000 in taxes before 2019. Now, they get to keep the entire $100,000 tax-free. As a result, alimony negotiations are more complicated as the alimony deduction played a huge factor in reaching settlements.

Dealing with tax consequences

The financial effects of the new tax code can be complex and create more anger during divorce negotiations. However, a new strategy is emerging as some high-asset couples are moving alimony payments into a trust.

Financial experts say grantor trusts ensure payments continue even after the payer's death, where alimony would stop. However, the receiving spouse is responsible for taxes on any distribution, and some accountants warn this method may receive more scrutiny from the IRS.

Seek compassionate legal advice

Texas is a community property state, meaning all marital assets are divided equally. Adding alimony and child support considerations can complicate a divorce, especially for high-asset families. The tax consequences over alimony payments can make the process even more contentious. An experienced family law attorney here in Texas will protect your interests and fight for you in court.

No Comments

Leave a comment
Comment Information

Client Testimonials

  1. Laura Dale the best Family Law attorney I have ever met... Posted by John...Listens, takes your calls, tells you the truth (even when it may not be what you want to hear)... Read More

  2. The Best...Posted by a Child Custody client... Laura Dale handled my international child custody and divorce matter. I am an attorney in Houston and was referred to her... Read More

  3. A Meticulous, Knowledgeable, Attorney with Heart...Posted by a Child Custody client... Laura was not the first attorney that my husband and I interviewed for an extremely complex... Read More

  4. Top Notch, Hands Down - The Best...Posted by Tammi, a Child Custody client... Laura Dale has been absolutely the best attorney I could have found for my difficult child custody... Read More

Contact Our Experienced Team Today | Se habla español | Nous parlons français

Due to the experience our lawyers have in many specialized areas, you can rely on us to put together the right team to handle your case, even if it centers on complex issues such as international family law, business valuation or bankruptcy. Contact us today to make an appointment to discuss your needs with a knowledgeable lawyer.

Login to Client Portal

Laura Dale & Associates, P.C.
1800 Saint James Place
Suite 620
Houston, TX 77056

Toll Free: 888-572-6059
Phone: 713-574-7952
Fax: 713-600-1718
Houston Law Office Map