New tax laws are about to change the way alimony/spousal support are taxed, ratcheting up the cost to payers. Current law surrounding spousal support payments dictate that these payments are tax deductible for the individual required to pay, and taxable to the recipient.
However, under the new tax plan, effective December 31, 2018, spousal support payments will no longer be tax deductible and the recipient of spousal payments will no longer have to pay additional income tax for payments received. Court ordered spousal support effective prior to December 31, 2018 may also be effected because it is modifiable.
As the tax burden by the payer spouse increases and the tax drag on the recipient spouse decreases, spousal support arrangements will likely be more contentious moving forward.
It is important for couples and their attorneys to consider the new tax treatment when drafting prenuptial or post-nuptial agreements and when considering the terms of a property settlement agreement.
Attorney Ronald L. Bell has decades of experience in complex business and family law matters. If you have questions regarding Illinois spousal maintenance or tax deductions for alimony, contact the Libertyville (IL) Law Offices of Ronald L. Bell & Associates for more information today at 847-495-6000.