Are you aware of the latest tax law changes related to alimony and separation payments? The IRS updates in its laws and regulations from time to time, and it can impact you big time. Thus, it’s best if you are abreast with all the changes that are happening in the tax sphere. Alimony and separation payments, which are made after a divorce or separation, is one such category of payments which has been impacted by the latest tax reforms. Such payments are usually made by one party to the other as maintenance payments or decrees.
The latest updates in the Tax Cuts and Jobs Act might affect you while filing your 2019 tax returns next year.
The following blog explains all you need to know about the latest tax reform and how it might affect you in the ongoing tax cycle.
The law in discussion relates to the various payments made under a divorce or separation agreement which includes the following: –
- Divorce decrees
- Separate maintenance decrees
- Written separation agreements
- Generally, if you are someone who makes payments to your former spouse, in the form of alimony, then you can deduct such payments while filing your tax returns. And the person receiving such payments shall include it in as part of their income while filing their tax returns. This way you would not be required to pay taxes on the amount made as such payments, but the person receiving such payments will have to reflect it in their income and probably pay federal taxes on the same.
- Beginning 1st January 2019, Alimony and Separation Payments paid by you to your ex-spouse would not be deductible from your tax returns and neither can be included in the income of your spouse while filing tax returns if they are made on the basis of a divorce or separation agreement executed after 31st December 2018.
- If your divorce or separation agreement was executed on or before 31st December 2018 and updated afterwards, then the updated law would be applicable to the updated agreement if the changes made so include: –
- Changes in the terms of the alimony or separation payments
- If the updated agreement states that the alimony and separation payments are neither deductible from your tax returns nor includable in your ex-spouse’s income while filing tax returns.
- If your divorce or separation agreement was executed on 31st December 2018 and no further changes were made after the said dates, then the previous law would be applicable in your case. The previous law would stand intact only if there are no updates made in the agreement on or after 31st December 2018 as mentioned in the above point.
Keeping a track of the latest changes in laws and tax regulations can help you file your 2019 tax returns seamlessly. The updates in the Tax Cuts and Jobs Act affect divorced and separated couples whose separation agreements are executed or updated after 31st December 2018. So, if you are one such person, then keep in mind the latest tax protocols and have a good tax filing experience in the upcoming year.
For more such tax news and updates, stay tuned with MyTaxFiler. We also provide a one-stop solution for all your tax-related woes. Simply drop a mail at email@example.com or call us at (888)-482–0279 for an on-call consultation.