Divorcing spouses in Washington State who have been working hard to come to a final settlement when ending their marriage may well have a new reason to try and push for a quick resolution. As explained by Bloomberg, the New Year will bring with it a major change to divorce taxes when it comes to alimony payments and this change may well increase the cost of divorces, especially for couples with high incomes.
Historically, if one spouse was required to pay alimony to a former partner, the tax liability for those payments resided with the person who received the money. In addition, the person who made the payments was allowed to deduct the payments from their tax return. This tax deduction in many cases provided a way for people to agree to paying spousal support and therefore helped to facilitate a final divorce settlement.
Effective January 1, 2019, that will all change abruptly. From that date forward, the tax liability for alimony payments will fall hard onto the person who pays the money to the former spouse. This may well result in more tax income for the government and less income for the then two households to share. Naturally, a person who faces the payment of spousal support may be less willing to agree to this as a term for their divorce.
Some couples might be rushing to complete their divorce in this calendar year just to avoid this issue, especially if they are relatively close to a settlement now. The new law may completely turn negotiations upside down.