A recent tax reform has drastically altered how alimony is figured into one's taxes, and these major overhauls are going to impact divorcees throughout Pennsylvania and the rest of the country. Many couples are now racing to complete their divorces before the new tax laws officially go on the books. Those who wait to get divorced may end up losing benefits and owe more money to the IRS at the end of the year.
In 2015, over 600,000 taxpayers claimed a deduction for their alimony payments. Couples who get divorced after 2018 may no longer be able to claim those deductions. It is also important to note that recipients will no longer be taxed on those payments if they get divorced after 2018.
Unfortunately, some of these laws are quite vague when it comes to prenuptial agreements made before 2019. If a 'triggering event" leads to the separation, then the recipient may have to pay taxes on their alimony. In one of those situations, the payor can then claim the alimony as a deductible on their taxes. Those who own businesses will also need to be more careful when going through divorces. The valuation of businesses is going to be slightly different after 2018, and some businesses will now be valued at much higher amounts.
Going through a high net worth divorce can be an extremely complex and convoluted process. It might be wise to have an attorney draft a prenuptial agreement. An experienced attorney may also be able to help a married couple that doesn't have a prenuptial agreement but plans on separating in the near future. That legal representative might be able to fairly split a couple's assets and come up with an alimony payment plan that everyone agrees on.