In late 2017, President Trump recently signed a new tax legislation.
It is, perhaps, the largest change in the tax system in a generation.
Some of the tax changes will directly affect Utahans who divorce and pay alimony.
Let’s focus what is most likely the most substantial change: doing away with the tax deduction for those who pay alimony.
The Way it Is Now
As it stands right now, people who pay alimony to their ex can deduct the amount of alimony paid on their taxes, thereby lowering their tax bill.
Conversely, the spouse that receives alimony must report the amount of alimony received as income on their taxes.
The Way it Will Be Under the new Tax Legislation
Under the new legislation, the spouse paying alimony cannot deduct alimony paid on taxes.
Conversely, the spouse receiving alimony does not count alimony received as income on taxes.
What Does this Mean?
The practical effect of this is that if you pay alimony, you’re going to pay higher income tax and have less money.
And if you receive alimony, you’re going to have a lower tax burden and receive an overall greater amount of money.
(If you want to know exactly what the difference will be between the present system and the new system, meet with your accountant to run numbers.)
When Will things Change?
The change to alimony under the new tax legislation applies to divorce decrees executed after December 31, 2018.
If you execute a divorce decree before December 31, 2018, your decree will be grandfathered in, which means the current way of determining tax will apply.
So, if you want your divorce decree under the tax system as it stands today, make sure you get everything done and signed before December 31, 2018.