Pennsylvania couples who had become aware of possible changes in tax laws that impacted alimony payments may have been attempting to settle divorce agreements before the New Year. Fortunately, for many couples in the process of divorce, they have until the end of 2018 to finalize their divorce before the new laws will go into effect. Couples in the process of a high asset divorce may not be able to finalize prior to the end of 2018, considering the length of most divorces.
The timeline for finalizing divorces can range anywhere between 14 and 24 months. High asset divorces are likely on the longer end of the time frame to be finalized due to the complexity of most of the cases. Although another year has been provided before new tax laws will be enacted, some divorces will not be able to be finalized before the end of 2018.
Current tax laws allow the spouse paying alimony to count the alimony as a tax deduction. The spouse receiving alimony must count the alimony as taxable income. The new laws eliminate the tax deduction, and spouses receiving alimony do not have to claim it as taxable income. In summary, spousal support will not have tax implications for either side.
Experts believe the new laws will complicate an already complex and painful divorce process. In addition, it is believed that alimony payments will be reduced, negatively impacting the person requiring spousal support. Pennsylvania lawyers anticipate an increase in all divorce cases in 2018, including high asset divorces, prior to the law going into effect.
Source: money.usnews.com, “Your Money: Get Ready for a Flood of Difficult Divorces in 2018“, Beth Pinsker, Dec. 21, 2017