It’s never easy for New Jersey spouses to make the decision to end a marriage, but in some cases timing is an important consideration. For example, spouses who expect to pay alimony should think carefully about how a big change in tax laws could alter their tax bills in the years to come. The Tax Cuts and Jobs Act has eliminated the alimony tax deduction, which will affect the bottom line for many New Jersey spouses.
The change doesn’t go into effect until next year. That means that divorce cases that are finalized by the last day in 2018 will be grandfathered in under the current rules. That means that spouses paying alimony can claim those payments as deductions, and spouses receiving payments must claim them as taxable income.
In order to retain the right to use alimony as a tax deduction, a divorce has to be final by the end of this year. While that may seem like many months away, it’s really right around the corner. Few divorce cases are wrapped up as quickly as the parties imagined, and there is little time left to accommodate a significant delay of any sort.
Filing now and working hard to reach a settlement is the best way to keep the right to claim alimony as a tax deduction. In some cases, this can make a big difference come tax season, so expect the issue to be used as a negotiating tactic. For those in New Jersey who are confident that their marriage is coming to an end, this is the time to file.