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Why alimony may be more contentious than ever

One of the biggest sticking points of many divorces is alimony. It’s tough for either party to willingly contribute to an ex’s financial well-being.

Unfortunately, there’s a new reason this may be the biggest issue in many New Jersey divorces.

New tax designations

The 2017 Tax Cuts and Jobs Act removed alimony’s tax benefits. Traditionally, alimony was taxable income for those who received it. On the flip side, paying out had been tax deductible. That’s no longer the case.

Those tasked with paying out no longer enjoy any tax benefits and that could drag out alimony battles.

This new designation may create friction in many separations going forward. The spouse forced to pay alimony will do everything possible to lower the amount, as he or she cannot recoup anything via taxes. This could create a situation where a divorce stalls for months over what’s considered the proper amount to pay.

How it could affect previous divorces

The new tax law grandfathers in divorces prior to December 31st, 2018. If a divorce was completed before 2019, any payments will be deductible.

However, if someone requires a modification the new tax law can apply to a restructured alimony. This means couples who may benefit from an updated agreement may instead opt to continue with their original arrangement to avoid losing tax relief.

What this means for divorcing couples

If you’re thinking about a divorce you may want to consider alternatives to alimony. Things like a lump-sum payment or a buyout may be the best solution for both parties.

Alimony’s new tax designation means it will remain a major point of contention between separating couples. A traditional settlement may no longer be the best solution for many looking to get divorced.

Whatever your situation, it’s important to explore your options with a skilled family law attorney.

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