Will Spousal Maintenance be Taxed Under the New Tax Law?
The recently-passed tax plan overhauls many aspects of existing tax laws, including eliminating the current tax deduction for spousal maintenance payments. Divorced couples, or those in the process of divorcing, may wonder what this repeal in the new tax law means for them financially. The experienced Wisconsin divorce attorneys at Milwaukee family law firm Bandle & Zaeske, LLP are knowledgeable in all areas of Wisconsin divorce law and strategically guide clients in spousal support issues for the best possible outcome in each case.
Wisconsin spousal maintenance
Spousal maintenance (formerly known as alimony) is designed to offer financial support from one spouse to another after the couple divorces. Spousal maintenance is separate from child support and property settlement. Wisconsin courts consider several factors when determining whether to award spousal maintenance, including earnings or earning ability of each, how long the couple was married, age and health of each spouse, division of property in the divorce, education level of each spouse at the time they were married and at the time of divorce, and other factors.
Existing tax law
Under existing tax law, spousal maintenance can be deducted by the spouse paying the support. Spousal maintenance must be reported as taxable income by the recipient of the support. According to the Internal Revenue Service (IRS), in 2015, approximately 600,000 Americans claimed an alimony deduction on their federal income tax returns.
Newly passed tax plan
The newly passed tax law repeals the alimony – or spousal maintenance — deduction, affecting divorces that are implemented after December 31, 2018. This repeal would not impact anyone who is currently paying spousal maintenance. Special rules apply where maintenance is already being paid, but where either former spouse asks for a revision to maintenance.
Prenuptial and postnuptial agreements
Prenuptial and postnuptial agreements will also be impacted by the new tax plan. These agreements may include clauses specifying the terms of spousal maintenance in the event the couple divorces. Because these agreements were written to reflect the tax deductions associated with spousal maintenance, they must be looked at in light of the new tax laws.
Have questions about divorce and spousal maintenance? We can help
The divorce process is complicated enough without pending changes to the tax law that make it even more confusing. Let us help. At the family law firm of Bandle & Zaeske, LLP, our Wisconsin divorce lawyers assist couples through all aspects of the divorce process, skillfully working to achieve the best possible outcome in each case. Arrange for a complimentary consultation with a member of our legal team to discuss your situation. Contact our office at 414-359-1424 or online.