There are many things to consider when contemplating a divorce. Individuals often worry about where to live, finances, relationships and custody of children following a high asset divorce. In addition to how a divorce will affect their daily lives and routine, individuals in Pennsylvania must now consider how a divorce will affect their taxes.
As anticipated for more than a year, new tax laws affecting alimony will go into effect Jan. 1, 2019. The laws will change how alimony is taxed or how it is not taxed. For decades, alimony was tax deductible for the payer, but it was taxed for the receiver. Alimony is no longer tax deductible for the payer, but receivers do not have to pay taxes on alimony income anymore.
Experts believe that the new tax laws may make future divorce negotiations more difficult than they already are. Under current tax laws, skilled attorneys could often argue that a former spouse could pay a higher alimony amount because the payer would receive a tax deduction on what they paid, increasing the receiver’s amount without limiting financial stress on the spouse paying alimony. Because payers will no longer have the tax benefit, experts worry that payers will only agree to lower alimony payments.
In addition to laws affecting alimony in a high asset divorce, it also affects transfers of retirement accounts such as an IRA. Processing all the life changes and details of a divorce can seem overwhelming and confusing. Skilled family law attorneys in Pennsylvania understand the stress and pain that accompanies individuals during the divorce process. As well as having the ability to advise how decisions in a divorce decree will affect an individual’s life post-divorce, attorneys can direct individuals to other skilled experts, such as financial planners, to assist with future planning.