Nebraska couples who are contemplating divorce may be interested in learning about changes to the tax law that go into effect with the new year. As of the start of 2019, alimony rules that have been in place for more than seven decades will change. Previously, alimony payments were tax-deductible for the individual who paid them. These same alimony payments were considered taxable income by the individual who received them. However, this situation will reverse for new divorcees starting in 2019.
Some may think that they can get their divorce in prior to Dec. 31 deadline. However, doing this is complicated, and many people who try may be disappointed. To qualify, the alimony agreement would either need to be in a final settlement or court order. Temporary agreements would not qualify.
However, if a person plans well and understands the changes to the law, the new tax code does not have to be all bad news. It’s simply a matter of planning financial aspects of the divorce ahead of time with these new regulations in mind.
For example, those considering keeping the house after the divorce should remember that mortgage interest deductions went from $1 million down to a cap of $750,000 as of Dec. 15 of 2017. Therefore, keeping the house may not provide the same tax benefits as it did in previous years.
Making financial decisions during the divorce process can be a challenge. However, a family law attorney can help a client draw up agreements, understand property valuation and figure out child custody issues. When necessary, an attorney may represent their clients in court.