The dawn of the new year in 2019 will also mean the introduction of new tax rules that could significantly affect Illinois couples planning on divorce. The end of 2018 will also be the end of alimony tax rules that have remained settled for decades; while the change will not affect couples who have already finalized their divorce, it will apply to everyone who ends their marriage moving forward. Many people are concerned about how the changing treatment of alimony could affect the potential of a divorce settlement.
Under the current rules, spousal support payments are tax-deductible for the payer. In addition, the recipient pays taxes on the alimony at his or her tax bracket, usually representing a lower rate. This leads to significant tax savings for a number of high-income couples going through a divorce. However, this will change; under the 2019 rules, spousal support payments will no longer be deductible for the payer, and the recipient will receive the income tax-free. Many fear that this will make divorce settlements far more difficult to resolve, as a significant incentive for generous alimony has been eliminated.
As a result, many couples are rushing to finalize their divorce before the end of the year. However, it takes time to move through the courts, so people who have not yet begun the process will need to think about how to work productively with the new rules.
People thinking about a divorce may be concerned about how the financial aspects of the end of a marriage will affect them moving forward. A divorcing spouse can work with a family law attorney to hammer out a settlement that addresses the applicable legal issues.