For Texas couples preparing for a military divorce, spousal support may play a central role in the negotiation process. Those couples should be aware that the ability to claim alimony payments as tax deductions is scheduled to come to an end at the close of this year. Understanding how that change might impact the bottom line for each spouse is important, and there is very little time left to make adjustments before the new rules kick in.
Currently, spouses who make alimony payments receive a dollar-for-dollar tax deduction. However, for divorces finalized in 2019, that deduction will no longer apply. That will leave the paying spouse with a higher tax obligation. What many spouses don't understand is that, with more money going to taxes, nothing is left for the parties to divide. The tax change could leave the recipient with significantly less alimony than he or she anticipated.
It's possible that these changes could bring more couples in front of the court. For those who have prenuptial agreements in place that cap alimony payments, a question remains regarding whether those caps should change based on the lost tax deduction. It may take years before enough courts rule on the matter to clarify how these issues will be resolved.
For those in Texas who are nearing the end of their divorce but haven't been able to hammer out a few lingering details, the issue of alimony tax deduction might serve as a powerful motivation to sit down and get things worked out. Finalizing by the end of the year can mean more money for everyone involved. The holidays are hectic times, so spouses should make every effort to get their paperwork in order in the coming days.