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Alimony Is No Longer Deductible Under New Tax Laws

DuPage County spousal maintenance lawyer tax lawsNew tax laws that went into effect for this year have brought about quite a few changes. One major change, which could be bad news for those who are currently in the process of divorce, is that alimony (known as spousal maintenance under Illinois law) is no longer tax-deductible for those who pay it, and it will not be considered taxable income for those who receive it. This may be a major loss for people who are required to pay a large amount of alimony.

The 2018 Tax Cuts and Jobs Act (TCJA) is in effect now, and it applies to any divorce cases finalized after December 31, 2018. Therefore, going forward, any divorce that includes spousal maintenance will follow the new rules. Pre-2019 divorcees, however, may still qualify for the old rules.

Payors: Does Your Pre-2019 Agreement Meet Requirements for Tax-Deductible Alimony?

Many factors go into determining whether you can still deduct your spousal support payments from your taxes, including, but not limited to the following: 

  • Payments must have been made based on a legal divorce or separation.
  • Payments must have been made to a spouse or former spouse, and they could not be considered child support.
  • Payments had to be made in cash or “cash equivalent.”

All of this can be rather confusing and complicated, but a professional divorce attorney can take a look at your divorce decree and help you sort through all the legal language to determine your best options. Rather than risk losing money from the TCJA changeup, you can stay a few steps ahead and avoid any errors in your tax return through professional assistance.

Recipients: Will You Still Have to Claim Alimony as Income on Your 2018 Taxes?

While alimony payors will likely not be happy with the new law, many recipients will benefit from the deal. Since they will no longer have to claim the maintenance they receive as income, they will possibly be in a lower tax bracket and avoid owing as much in taxes. However, some of the same rules will apply for pre-2019 agreements as those listed above for payors. 

How Will You Know Whether Your Agreement Is Affected by TCJA?

If you are not up-to-date on all the latest laws and regulations involving divorce decrees and the IRS, your best bet would be to call a Wheaton divorce attorney and seek legal guidance on the matter. Call 630-580-6373 and set up a free consultation so you can rest assured that you are following the law correctly when you file your taxes for 2018 and future years. 

Sources:

https://www.marketwatch.com/story/new-tax-law-eliminates-alimony-deductions-but-not-for-everybody-2018-01-23

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Davi Law Group, LLC handles family law, estate planning and real estate matters for clients in Chicago and throughout the western suburbs including DuPage County, Will County, Kane County, Kendall County and Cook County and the cities of Aurora, Bloomingdale, Bolingbrook, Carol Stream, Darien, Downers Grove, Elmhurst, Geneva, Glen Ellyn, Hinsdale, Joliet, Kendall County, Lisle, Lombard, Naperville, Oak Park, Oak Brook, Oswego, Park Ridge, Roselle, St. Charles, Villa Park, Warrenville, Wheaton, Winfield, Woodridge and Yorkville, Illinois.
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