Due to changes in Missouri and nationwide made by the Tax Cuts and Jobs Act the deduction for alimony has been eliminated for new divorces finalized after Dec. 31, 2018. For many decades family law has been marked by a federal income tax rule that says that alimony is deductible to the payer and income to the recipient. This gave an incentive for the spouse who was making substantially more than the other spouse to provide alimony to the needier spouse while paying less in taxes in return.
That incentive will be gone for cases settled after the end of 2018. This may also have the effect of putting some spouses who lose the deduction into a higher tax bracket so that the bite will be even more caustic to tolerate. In families where one of the spouses needs that spousal support to survive on, the wealthier spouse will still have to pay despite having lost the deduction.
Some hardship, however, will be alleviated to those who can figure out how to settle their divorce case prior to the end of the year. If they are fortunate enough to do that, the old rules would be grandfathered in and each person can take the tax benefits into the future as in prior years. Settling a divorce in Jan. 2019 or anytime thereafter would be too late.
If one needs to rush through a divorce settlement before this coming Dec. 31, it may be best to pull out the stops and focus only on those aspects of an agreement that are essential. The assistance of the family law attorney and a Certified Financial Planner will be essential to assure compliance with all of the rules and laws that have been published. Residents of Missouri and of other states will jointly experience this sea-change of policy together and will likely weather the storm together as a new set of protocols is engaged.