People who have gotten divorced in Wisconsin know that the financial ramifications of this experience may be long-lasting, especially when taxes are involved. The fact that tax laws can change as well may also play into the uncertainty of just how a particular agreement during a divorce might come to cost one or both spouses dearly in the end. With the announcement of the recently passed tax reform laws, many people are taking a fresh look at how alimony may change once the law goes into effect.
As explained by MarketWatch, historically when a divorced spouse receives money in payment of a spousal support award, they would be required to claim that money as income on their federal tax return. The person who paid the spousal support would, in turn, deduct the amount of money paid from their overall taxable income. This is the basis on which tax responsibilities associated with alimony payments would be considered by parties during their divorce settlement negotiations.
Some believed that the ability to deduct alimony payments may have helped to ease the pain even just a bit for the person who had to make these payments. Now, starting in 2019 the tax liability is going to flip flop, leaving the paying spouse also responsible for the taxes.
If you would like to learn more about how alimony payments are taxed today, how that is set to change next year and what that might mean for you if you get divorced this year or after, please feel free to visit the marital dissolution and taxes page of our Wisconsin family law website.
