If your divorce finalized on or before December 31, 2018, anyone paying alimony can claim spousal maintenance expenses to receive a tax deduction. Additionally, the recipient of the alimony will declare their payments as taxable income. However, new laws swept the nation affecting divorce judgments and modifications as of January 1, 2019. Here is how the new rules will affect you.
The Party Making Payments
If you finished signing the divorce settlement last year, the new tax laws do not pertain to you. Anyone just tying up the loose ends of their divorce or making modifications this year need to know that, going forward, any alimony paid is no longer tax-deductible.
How much you spend is also different with new calculation guidelines. Previously, maintenance payments were calculated by subtracting 20% of the recipient’s gross income from 30% of the gross income of the payor, capping out at 40% of the total combined gross income of both parties. One new change uses net income rather than the previous gross income standard. Today, a spousal maintenance payment is calculated by subtracting 25% of the recipient’s net income from 33.33% of the payor’s net income....