I had heard references to a change in alimony tax liability, I've just looked it up. Divorces after 2018 (I believe the key event is to "final decrees" or when the divorce is final) will be treated similar to child support where the payer also has the tax liability. This is a reversal of existing laws in the USA. This is on Kiplinger:
Under the New Tax Law, Is My Alimony Tax-Free?
For divorces after December 31, 2018, alimony payments are no longer deductible nor must the recipient declare the amount as taxable income.
The new policy goes into effect in 2019. Older divorces can be modified to follow the new rules—if both parties agree.
Essentially, alimony and child support will henceforth have the same behaviors, the payer can't deduct it anymore starting with divorces completed next year. This is a huge change to us here. Our divorces often drain our financial resources and reserves. Having the generally lower-income recipient pay the tax liability reduced what was due in taxes and so the loser was generally the government who got less tax or none. I figure that's why that alimony perk is ending, the tax man wants his money. Not to worry, those with alimony already in force are grandfathered in to the prior policy.
I believe this will impact our strategies in divorce negotiations. No longer will alimony be a way to negotiate an agreement to pay less child support in order to lessen the tax burden.
In the past, as in my case for example, we agreed to alimony rather than child support for the first 3 years post-divorce. It reduced my tax liabilities and since my ex was earning next to nothing in those years she didn't get dinged on taxes either. However, my lawyer warned me that at any time she could still ask for CS. To address that risk, our settlement included a clause that if she sought CS during the span of alimony then the alimony would be reassessed lower. Fortunately she didn't seek CS until alimony ended.
I looked at IRS Topic 452 for Alimony and it is not updated for the recent tax law change.
