Alimony or spousal support is awarded in Georgia divorces under limited circumstances. Georgia treats alimony as either “rehabilitative” or “permanent,” meaning the award is temporary or lasts indefinitely. Most alimony payments will cease after a contractual period of time. The purpose of alimony, whether temporary or permanent, is to maintain financial stability during divorce proceedings and for a period of time following the divorce.
When alimony is an available remedy in a divorce, the spouses often negotiate the amount of payment or term of payment considering tax treatment of the parties. In the past, the parties had a good deal of flexibility with how the payments were treated for purposes of federal taxes. The new changes to the tax law will limit some of that flexibility by imposing a tax burden where a tax benefit was once received.
Tax Treatment of Alimony Payments
Through December 31, 2018, divorce agreements with alimony provisions contain a tax benefit to the paying spouse. Under current U.S. tax code, the spouse paying alimony can deduct these payments on his or her tax returns and is not responsible for paying taxes on the alimony payment. The taxes, if any were paid by the spouse receiving alimony on his or her tax returns as income.
Alimony Payments to Spouse are Now Taxable to Paying Spouse
Effective January 1, 2019, the individual paying alimony will be required to pay tax on any payments made to an ex-spouse. This change applies to any alimony orders or divorce agreements that go into effect after January 1, 2019. Existing divorce agreements and orders with alimony or spousal support provisions are not affected by this legislative change.
How Does This Change Affect the Receiving Individual?
The practical effect of this tax code change is that the paying spouse will have less income available to pay alimony and child support because his or her tax bill will increase. Child support is based on the net income of both parents – the paying spouse’s net income will go down; the receiving spouse’s net income will increase; and the child support payment to the receiving spouse who is typically the custodial parent will decrease.
Do I Need an Alimony Lawyer?
If alimony is an issue in your divorce, it is important you speak to a Georgia Alimony Lawyer to understand how the changes will impact your alimony obligation or income. The tax treatment of the changes will not affect an existing alimony order or marital settlement agreement, especially if there is also an order for payment of child support.
If you are contemplating filing for divorce and wish to learn about your rights and responsibilities during and after a divorce, contact the Berelc Law Office for more information and to schedule a consultation. The Lavonia, Georgia divorce lawyers have experience in contested and uncontested divorce matters as well as in family law matters like child support, child visitation, including modifications of such orders, if eligible. Contact us today to schedule a consultation.