The Georgia legislature passed a new tax law effective January 1, 2019, lowering income tax rates for individuals and corporations, along with increasing the standard deduction to a maximum of $6,000. This is good news for most taxpayers. However, the federal Tax Cuts and Jobs Act makes changes to how alimony is handled at tax time, which may make those with alimony payments a bit less excited to file taxes than usual.
How Does This Affect My Alimony?
If your divorce was final and alimony agreements made before January 1, 2019, nothing will change. Alimony payments made can still be deducted from taxable income and alimony received is still reported as income. However, if your divorce becomes final or you make changes to your alimony agreement on or after January 1, 2019, the new tax law will significantly change deductions and reported income for individuals with alimony agreements in 2019.
Under the new law, alimony payments can not be deducted from the payer’s taxable income, and the recipient of alimony payments does not have to report them as income. In other words, the tax burden of alimony is shifted from the recipient to the payer. This may be an expensive change for the payer of alimony, as it eliminates one deduction that would have previously lowered your tax obligation. In some cases, this could make it more difficult to keep up with alimony payments.
On the other hand, if you are a recipient of alimony payments, the change will help to lower your taxes and ensure that you are able to keep and use your alimony payments to maintain financial stability, as they were intended. However, some opponents of the change point out that there is now no tax incentive to help motivate the paying spouse to make payments, potentially causing more headaches for receiving spouses.
Keep in mind also that, under Georgia code, the amount of alimony is determined by several factors, including:
- Standard of living
- Length of time married
- Age and physical and emotional condition of both parties
- Financial resources of each spouse
- Time necessary to gain education or training needed to secure a job, if needed
- Contribution each party made to the marriage
- Financial condition of each party, including earning capacity and assets
Under the new tax laws, it is possible that the courts will assess lower alimony payments for couples splitting in 2019 than if they had split in 2018. This is because the tax burden has shifted to the paying spouse, effectively lowering the funds available for alimony payments. Additionally, the receiving spouse does not have to pay taxes on alimony payments, which results in increased financial resources once alimony is awarded.
Contact an Experienced Attorney
If you are considering making changes to your alimony agreement, contact the attorneys at Lankford & Moore Law to ensure the best possible tax situation. We can also help you navigate issues such as non-payment of alimony and help your family to remain financially stable, regardless of alimony tax laws.