Alimony and income taxes in Connecticut

Spousal support payments have historically been tax deductible to the payor but that will soon be changing once the new tax code takes effect.

The prospect of getting divorced is rarely something about which people in Connecticut feel positively. Even if a marriage is not a happy or fulfilling one, ending it forces spouses to face a lot of loss, including the loss of some dreams they once had for their future. In addition, there may be financial aspects to a divorce that can add to the sense of loss that people experience.

For spouses who end up being ordered to pay alimony, the financial sting of divorce may last for many years after the divorce is finalized. For many decades now, one of the things that has been offered to payors of alimony has been the ability to deduct the amount paid in alimony from their income n their federal income tax returns. This, however, is all about to change very soon.

Who has been paying taxes on alimony?

Under the law applicable to divorces which occur before January 1, 2019, a person who pays alimony will be able to continue to deduct it from their income on their personal Federal Income Tax returns. The person who receives alimony must claim the money as income on their personal tax. There are some requirements around what can be claimed as alimony. These include the fact that the two spouses must file separate tax returns, not a joint return and that the money be paid in the form of a liquid asset, not property such as real estate.

How will alimony taxation change and why?

According to MarketWatch, the recently passed Tax Cuts and Jobs Act will turn alimony taxation on its head starting January 1, 2019. For any divorce that is finalized after that date, the paying spouse will no longer be able to deduct alimony payments from their tax return. This may make people even less willing to agree to such payments or may lower the amount they agree to pay. Those who receive alimony will no longer have to pay taxes on the payments thereby, effectively increasing the amount received by them.

How can I understand my alimony options?

Anyone who is facing an impending divorce in Connecticut should contact a lawyer to learn how the change to alimony taxation may impact them and their ultimate divorce settlement. A knowledgeable divorce attorney can help you navigate this, and all of the other financial issues involved in a divorce. You can contact me to discuss the changing landscape regarding alimony payments, or any other aspect of divorce law.