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Will changes in alimony provisions affect your divorce?

Perhaps you have been considering divorce for some time. You and your spouse may have spoken openly about it, but, for whatever reason, decided to put it off. Like many higher-earning spouses in New Hampshire, you may have expected that you would pay your spouse alimony, at least for a few years, until he or she found a way to live independently of your financial support.

After all, this seems a fair exchange if your spouse gave up a career to stay home and care for the children while you became successful in your profession. Besides, alimony is a tax break, something you can deduct each year, which not only makes it palatable, but even gives you incentive to be generous to your spouse. However, all those perks may be changing by the end of this year.

The way it was

You may have expected a tax deduction for paying alimony because it has been in effect for about 75 years. If you pay alimony, you may deduct it from your taxes. This was a positive way to motivate a higher-earning spouse to agree to spousal support without the lower-earning spouse having to drag the matter through a contentious court battle.

On the other side, the receiving spouse paid taxes on the amount received. The logic of this was that the lower-earning spouse was also taxed at a lower level and would not be paying as high a tax as someone making more money. That is about to change.

The new provisions

The new tax code takes effect in 2019, and among its provisions is a major change in alimony rules. Beginning Jan. 1, if you pay alimony, you may not deduct it on your taxes. Additionally, your spouse will not have to claim it as income or pay taxes on it.

Most states use tax codes to even begin calculating alimony payments. These codes will not be helpful once the tax rules change. Additionally, you may see that fewer couples end their marriages through mediation and arbitration, which the agreeable conditions on alimony payments made possible, in some part.

What is your next move?

Some family law professionals speculate that, in addition to divorces becoming more contentious, there may also be fewer divorces. You may be among the higher-earning spouses who feel they can't afford to divorce because of the taxes they will end up paying. You will have a choice between remaining in your unsatisfying marriage or rushing to divorce before the new tax codes take effect.

Whatever your decision, an attorney can assist you by explaining your options and working through the pros and cons of your situation. With solid advice and guidance, you may be better able to make a choice that will bring you peace of mind for your future.

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