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2019 tax changes set to affect spousal support

Post-divorce support payments are a common feature of Louisiana family law. Spousal support is just one such payment that involves one person making temporary, regular payments to an ex. In some cases support takes the form of a single, lump sum. The goal is to provide sufficient financial support until such a time that the recipient is stable. With the effective date of certain changes to the federal tax laws approaching, some couples may want to consider finalizing their divorces before the end of the year.

Currently, those who pay alimony can deduct it on their taxes while recipients are taxed on the amount as income. This is different than how other payments — such as child support — are treated, which is essentially as tax-neutral. Child support payments are not taxed on either the paying or receiving side and neither can deduct the amounts.

Starting in 2019, alimony payments will be treated like other post-divorce payments — tax-neutral. Although this will likely simplify the process of making and receiving payments since they will all be treated the same at tax time, not everyone is happy with the change. A high-income individual can deduct large alimony payments and bump themselves down into a lower tax bracket. Alimony recipients usually — although not always — are in lower tax brackets, so listing spousal support as taxable income is generally not a burden. However, it is said that this system is apparently plagued by fraud in which a payer deducts far more alimony than he or she actually paid.

Louisiana couples should not rush carelessly through the divorce process in order to preserve certain tax benefits for spousal support, however. Although finalizing before 2019 will preserve those tax effects, it should not be done at the expense of a thoroughly crafted divorce settlement. Instead, couples may want to consider where they are at in their divorce process and the relative benefits of finalizing sooner versus later.

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