A new tax scheme for alimony that will be effective in 2019 should prompt couples to finalize their divorce this year, or risk being entangled in a more complicated process.
If you filed a petition in Colorado, you should ask your divorce lawyer in Colorado Springs if it’s possible to rush the process. Law Office of Gordon N. Shayne notes that this will, of course, require the cooperation of your spouse, especially if you’re the one who’s likely to pay alimony.
Those who currently pay alimony can deduct the payments from their taxable income, while the tax burden falls under the recipient’s responsibility. If you finalize the divorce in 2019, the new law will require alimony to be taxable from the income of the paying spouse.
You may think that this good news for the one who receives spousal support, but the elimination of the tax incentives means that payments would effectively become smaller. In the end, the new tax system will not be beneficial for both parties.
Some financial advisors expect couples to include their individual retirement accounts (IRA) as part of divorce negotiations, as a result of the Tax Cuts and Jobs Act. For instance, a husband with a higher income may provide their ex-wife with a lump sum from their IRA.
This move may protect the paying spouse from taxes if they use their income to pay alimony. However, this would only be possible if your partner is willing to wait before they can withdraw money from the account.
A transfer of an IRA account is tax-free, but it imposes a 10% penalty if the person takes money from it before they are at least 60 years old.
The current alimony scheme from a divorce settlement is already complicated as it is, so you should try to work with your spouse in finding middle ground on negotiations. With less than six months before 2019, how do you plan to expedite your divorce?