TAX TREATMENT OF ALIMONY IS CHANGING SOON

A previous post on this blog talked about what factors judges in Mobile, Alabama, use to determine whether to award alimony to one spouse in the event of a divorce and, if so, how much alimony to award.

The previous post explained that ultimately, alimony awards have to be fair to both sides. While a judge may ultimately have to decide what is fair if the spouses cannot agree, there are oftentimes advantages to the couple working out an issue like alimony among themselves, without having to go to court.

One thing Alabamans need to keep in mind in this respect is that the way alimony get treated with respect to federal income taxes is changing in the upcoming weeks. Specifically, for any alimony order entered on or after January 1, 2019, the payments will not be taxable income to the person receiving them. On the other hand, the person who pays will not get the benefit of a deduction on their income taxes.

The current rule, and the rule for most alimony orders entered through December 31, is that the person who agrees to pay alimony enjoys the benefit of a deduction of those payments on his or her federal income taxes. The flip side is the person who receives the spousal support has to report those payments as income.

How this change will affect the family law landscape in the long term is unknown. In the short term, the change does not necessarily mean people need to be in a hurry to get alimony orders finalized, as rushing could create more problems than it solves. People do need to be aware of this change, however, and should discuss it with their attorneys if they have questions.