Recent changes to tax laws have affected how alimony is taxed. Essentially, the move by the Trump Administration, which was sealed into law in January of this year, reverses who the tax burden falls on. Here’s what you should know about how alimony is taxed in 2019.
The Tax Cuts and Jobs Act — What Is It?
As of January 1, 2019, the Tax Cuts and Jobs Act went into effect. Designed to do many things, including trim down the time it takes for the IRS to process tax returns and reforming itemized deductions, alternative minimum tax, and child tax credit. U.S. citizens everywhere are affected by these new laws, so it’s important to understand what they do and how they impact your specific situation.
The New Law’s Effect on Alimony Taxes
The most significant change to how alimony is taxed is that the tax burden has shifted to the payer and is no longer bore by the recipient.
How Alimony Was Taxed Prior to 2019
Before the Tax Cuts and Jobs Act went into effect in 2019, the tax burden on alimony payments was bored by the recipient. This means that for the recipient, alimony payments were considered taxable income and for the payor, payments were tax deductible.
How Alimony Is Taxed Now
Now, the tax burden has shifted to the payor. Alimony is no longer considered tax deductible and it is not considered taxable income. This means the payor is responsible for paying the taxes on alimony funds instead of the recipient. This lightens the financial load for the recipient but places a heavier one on the payer.
Child Support — Impacted By Tax Cuts
In New Jersey, the way child support taxes are calculated and paid have been affected by the Tax Cuts and Jobs Act. It’s not considered a tax-neutral event as may be the case in some states, the funds paid out on child are no longer Tax Deductible for the payer and is not taxable to the receiving parent.
Contact a New Jersey Divorce Lawyer Today
How alimony is now taxed can make a significant difference in your finances depending on whether you are the payor or the recipient. Learn more about alimony taxes and how to negotiate fair alimony payments regardless of which side of the situation you are on by calling Hackensack Divorce & Family Lawyer Rita Jerejian at 201-487-1199.