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Alimony, taxes and divorce settlements

Reaching an agreement on a final divorce settlement can be a major accomplishment for couples in Michigan. It is understandably a challenging thing to do given that two people who have likely identified a lack of ability to work together have to come to terms with how they will split up their shared lives. This touches the most emotional elements of their lives as well as the financial side of their lives. The tax implications of many decisions may contribute toward the final decisions made.

The Internal Revenue Service notes that for spouses who are ordered to pay alimony, one benefit to them is that they have been able to deduct the money paid from their tax returns. For some, this may ease the sting just a bit of making such payments.

However, as the New York Post explains, this will only be the case for one more tax year when filing their 2018 tax returns in the spring of 2019. The following year in 2020 when a person files 2019 tax returns, this may not apply to them. Anyone who has a divorced finalized after January 1, 2019 will no longer be able to deduct spousal support payments from their taxable income. This also applies to anyone with an existing divorce agreement that is modified after January 1, 2019.

The change is due to the recently passed tax overhaul and essentially gives divorcing couples until the end of this calendar year to come to an agreement if they want to leverage the current alimony taxation system where the payer deducts the money and the receipient pays taxes on it.

 

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Lorrie J. Zahodnic

"I will hold you up until you can stand on your own two feet."

Lorrie J. Zahodnic, P.C. has provided skilled and compassionate legal guidance to Michiganders in family law matters for over 20 years.

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