While state law defines many of the issues around spousal support, the basic taxation of alimony payments has been consistent throughout the United States for the last 75 years. Up until this point, spousal support has been deductible for the payer and reportable as income for the recipient. Under the Tax Cuts and Jobs Act, however, spousal support divorcees in Louisiana and across the United States will see this switch as it will no longer be deductible for the payer.
This change could complicate negotiations in some divorces, as the current tax relief can help soften payers and move negotiations along. This will increase the tax burden on many of the couples seeking a divorce, as the payer of spousal support often is in a higher tax bracket than the recipient. This may mean that Louisiana couples will have a tougher time negotiating their divorces after Dec. 31, 2018, or that they may choose to stay together for financial reasons.
People who are already paying or receiving alimony may have questions about the new tax laws. Some may want to modify their existing agreements based on the new taxation standards. While it may appear on the surface that recipients will get more money from this new set up, the change will affect the payer’s after-tax income and therefore could give them an opportunity to renegotiate their alimony and pay a lower amount.
Changes to state and federal laws can have a big impact on divorcing couples as they seek to negotiate spousal support and other issues. They can also come into play when an agreement is renegotiated over time. Those with questions about how the new tax laws will affect them along with other Louisiana spousal support laws should contact a local lawyer.
Source: CNBC, “Alimony tax changes may scorch divorcing couples“, Annie Nova, Feb. 16, 2018