New 2019 Alimony Tax Laws

 Excerpts
Couples are trying to beat the clock because starting in 2019, the new tax plan makes a significant change to how alimony payments are treated.
For divorces finalized by the end of 2018, alimony payments are deductible for the payor and taxable to the payee. But starting in 2019, alimony will be tax neutral.
"This could have a monumental negative effect on the economic circumstances of the payor," said Tom Snyder, a family law attorney with  Einhorn Harris in Denville.
All divorces before 2019 will be grandfathered under the old deductibility rules.

The deduction change will, in many cases, give more to the federal government.
That's because it's common for the alimony payor to be the breadwinner, or the higher income earner, and therefore the payor would be in a higher tax bracket.
Now that alimony can't be deducted by the payor, more taxes will be paid on those funds compared to how it works for 2018 divorces.

Say someone earns $500,000 a year and pays alimony of $150,000 a year. In 2018, the payor would owe $93,990 in taxes - assume for a moment no additional deductions - and the alimony recipient would owe $27,410 because the alimony would be taxed. But if the divorce isn't finalized until 2019, the payor would now owe $146,490 in taxes and the recipient would owe nothing.
That means the feds would get $25,090 more in tax dollars under the new 2019 rules.
A person who earns $300,000 a year and pays $100,000 in alimony, in 2018, would owe $41,851 in taxes while the recipient would pay $15,404. In 2019, the payor would have a tax bill of $76,490 and the recipient would owe nothing.
The feds would get $19,235 more than if the divorce was finalized in 2018.
Finally, take the case of someone who earns $100,000 and pays $33,000 in alimony. In 2018, the payor would owe $8,045 and the recipient would pay $2,333. Compare that to 2019, when the payor would owe $15,416 and the recipient would owe nothing in taxes.
Once again, the feds would get more. Under 2019 rules, it would get $5,038 more than under the 2018 rules.

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