ROCHESTER, NY (WXXI) – The new federal tax law means big changes for divorcing couples in 2019.
“Most matrimonial lawyers are going crazy trying to wrap up the cases they have pending before the end of the year,” said Rochester attorney Brian Barney.
Starting January 1, divorcing couples have to comply with a new federal tax law regarding alimony payments. People who pay alimony to a former spouse will no longer be able to deduct those payments from their taxes, and the spouse who receives the payments will no longer have to declare them as income.
Barney says it’s not yet clear whether judges will allow lower alimony payments to offset the lost tax deduction, and he thinks the confusion will result in more litigation.
“In the wealthy cases, we won’t have an issue,” said Barney. “In the cases where you have two spouses and one earns $75,000 or $80,000 and the other earns $30,000, we’re gonna have issues.”
Certified Public Accountant David Young thinks the new tax law will hurt many families economically. “The only one that benefits that I can see is the government,” he said.
In addition to the loss of a tax deduction for the alimony payer, Young says the new tax code presents a disadvantage to the spouse who receives alimony.
“Historically, if you’re the recipient of alimony and this was your only source of income, you could have put that money into an IRA and saved for your retirement. Now, under the new rules, if you’re receiving (alimony) but you’re not receiving it as income, you cannot fund an IRA.”
Barney foresees more expensive divorces as another consequence of the new law. He says tax experts may be called in to testify, adding another layer of expense. He also expects more litigation over the issue of alimony payments unless, as he terms it, common sense sets in.
“Common sense is difficult when both parties are struggling to live on less than they had in a common household.”
Barney said he’s not sure judges themselves know how they will interpret the new law.