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Managing divorce after the alimony tax rule changes

In 2019, alimony will be different for newly divorced couples in Georgia, at least when it comes to taxes. Going forward from Jan. 1, alimony payments will not be tax-deductible for the ex-spouse making payments. Also, the recipient will no longer have to list payments as taxable income. For couples not able to get their divorce in before the new rules take effect, it may still be possible to minimize financial burdens after a split.

The American Academy of Matrimonial Lawyers points out that alimony arrangements must be in a final divorce settlement or court order. This means that temporary agreements quickly prepared in an attempt to beat the tax change deadline won't legally hold up. However, there are other Tax Cuts and Jobs Act adjustments that could apply to newly divorced adults. For instance, the increased child tax credit may benefit the parent who gets custody of children.

It's also possible for divorcing couples to explore options other than traditional alimony. One alternative is property division, which involves making payments based on the total value of marital worth. However, there are some notable differences with alimony and division of property. If a paying ex files for bankruptcy, division of property payments would end. Also, only up to 25 percent of wages can be garnished if payments aren't made with division of property arrangements while it's up to 50 percent for alimony delinquencies. Another option is for an owing spouse to make one large, one-time payment.

The flexibility with spousal payments or support often depends on how civil former spouses are able to be toward one another. For times when a dispute over alimony or similar arrangements arises, it may be necessary to seek assistance from an attorney. A lawyer may also negotiate details such as the amount of division of property payments or terms related to alimony payments. Some clients seek additional input on the possible tax consequences associated with seeking the marital home. For example, mortgage interest deductions are now capped at $750k under the new tax law, and state and local income taxes are capped at $10k.

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