We can all agree that paying taxes and getting divorced are two things that suck.
So imagine, getting divorced, paying alimony and paying taxes on your alimony…that really sucks!
The reality is that anyone who gets divorced and has to pay alimony after December 30, 2018 will have to pay taxes on the alimony payments made to their ex . . .thank you new tax laws.
Understand that in writing this article, we are not encouraging you to get divorced. The reality is that the decision to divorce must be made by the individual seeking our legal advice.
Instead, in writing this article, we are trying to explain some of the tax consequences of waiting to divorce.
Remember that at the end of last year, Congress passed a tax reform law. Whether you agree or disagree with the tax reform laws, if you are planning to divorce, you need to understand that one of the new changes to our tax laws includes a tax on divorce judgments after December 31, 2018 order alimony.
So what does this mean to you?
Payors of alimony will no longer be able to deduct the alimony payments as taxable income. Instead, alimony will be treated like child support and have no effect on the taxes of the parties. It is important to remember that this new change will not affect alimony judgments prior to December 31, 2018.
So, if you think you might be getting divorced and you might have to pay alimony, DO IT NOW or pay the tax consequences later!
If you are considering a divorce, keep reading to determine whether or not the new tax laws will affect your divorce case. Once you have considered the information below, it may be in your best interest to pursue a divorce now to save yourself the tax consequences later.
First ask yourself “Am I likely to pay or receive alimony?”
In Nevada, there are many factors that a judge will consider when making an award of alimony. We have addressed alimony in significant detail in our article Nevada Alimony Made Easy.If you believe that alimony is a likely outcome in your case keep reading to determine whether delaying your divorce will result in tax consequences to you.
Next, ask yourself “If I am likely to pay or receive alimony will the alimony award be so significant that I should be concerned with the tax consequences?”
As we have explained in other articles, there is no set formula in Nevada for calculating alimony. However, a good divorce lawyer should be able to give you a decent idea of what an alimony award may look like.
A good rule of thumb will be to consider the length of marriage and the income of both parties. If the marriage is greater than four years and the income between spouses is drastically different, there is likely to be some alimony award, even if the award is temporary.
Because calculating alimony in Nevada, and particularly in Las Vegas, is very judge specific, it is important to consult with a qualified and experienced divorce lawyer to discuss whether an alimony award is likely in your case and to obtain an estimate on the alimony likely to be awarded.
If it appears that the award will be significant, you need to consider the tax consequences for such an award.
How does the December 31, 2018 deadline apply to Nevada divorces?
The Tax Reform law effects any divorce or separation instrument executed after December 31, 2018.
It appears that any separation agreement or judgment executed prior to December 31, 2018 would be under the existing tax laws with alimony deductible if paid and taxable if received.
Since there is no waiting period for divorce in Nevada, it appears that any divorce decree filed after December 31, 2018, will be subject to the new tax laws.
What happens if a current alimony judgment is modified or changed after December 31, 2018?
From what we can tell, any current order of alimony that is modified or changed after December 31, 2018 will lose the current tax deductibility and will be controlled by the new tax reform laws.
This means that even if your current agreement calls for payments to be deductible from taxable income, Federal law will control and you will not be able to deduct alimony payments if modified after this date.
What other things should I consider with regard to alimony, divorce and taxes
The biggest consideration for an alimony divorce in Nevada is time. Most contested divorces in Nevada take at least six (6) months to one (1) year to litigate to completion. If you think your divorce is going to be contested and alimony will be paid, you need to file now! Waiting could cost you more money and result in significant tax liability.
This is a complicated area of law. If you are considering a divorce and think that alimony is a possibility then you should consult an experienced divorce lawyer to discuss the applicability of the Nevada alimony law and if the Tax Reform Law may be an issue for you to consider.
At Rosenblum Law Offices, we can help. Our experienced divorce attorneys have handled over 2,000 family law cases. Our divorce attorneys can assist in guiding you through the divorce process and can address your alimony concerns in a quick and cost-effective manner. Call us today at (702) 433-2889 or fill out our on-line form for more information. If you enjoyed this article, please leave a comment below.