Tax considerations aren’t normally part of the thought process of divorce, at least initially. Most people focus on determining what’s fair in terms of property division, working out a suitable parenting plan, and helping their children deal with the process as best they can.
These are all important considerations, but the recent changes to the tax code could have significant impact on those who decide to get divorced. Here’s how.
No more deductions for spousal maintenance
Perhaps the biggest concern among divorce lawyers is that under the new tax code, payments for spousal maintenance (aka alimony) will no longer be deductible for those who pay it, starting in 2019. Similarly, it will no longer be considered taxable income for those who receive alimony.
At first glance, this seems like a win for both parties. However, many experts are worried this will encourage spouses to forego spousal maintenance altogether, since the tax incentives will no longer be available. This could put some spouses, who perhaps gave up a career to take care of the home and family, at an economic disadvantage following divorce.
Several also note that alimony tax deductions often help rather than hinder divorce negotiations. Without those incentives, divorces could become messier or longer.
What does Washington law say?
Remember that spousal maintenance is optional, unlike child support. Washington State law allows for it but does not require it to become part of any final settlement. And as of 2019, it will also no longer be taxed or tax deductible. This means there could also be a rise in divorces this year as people attempt to settle things before the new tax code takes effect.
Thinking ahead
As April 15 approaches, those considering divorce or who are already in the midst of divorce may have already begun thinking about how divorce affects their taxes. Tax time creates unique challenges for those going through a separation anyway, and these changes do not help clarify matters. If you have questions, it is best to discuss them with a qualified divorce attorney who can help you put the law in context and in light of your individual circumstances.