People in Louisiana who get divorced commonly must go through the process of splitting their marital estate. This can be a challenging process as it involves some negotiations between parties who do not agree on many things. Along the way, each party may experience some losses and may also need to concede some things to get to a final settlement. Starting in 2019, the road to this final settlement may well look different than it does today.
One factor that should be evaluated before making an agreement in a divorce relates to taxes. Many decisions made during the breakup of a marital estate will have tax implications for one or both parties. The payment of spousal support is one of these decisions. Historically, federal income taxes on spousal support payments have been the responsibility of the person who received the money as income. The paying partner would, in turn, deduct the amount paid from their tax return.
As explained by Bloomberg, the Tax Cuts and Jobs Act is set to turn this structure on its head effective January 1, 2019. Starting in the New Year, federal income taxes on spousal support payments will be the responsibility of the person who makes the payments.
A person who might be pushed to pay alimony may be far less willing to agree to these payments knowing that they will then get hit with a big tax bill on top of it. This change could have significant implications for how divorce negotiations are managed and what a final settlement might look like.