It isn’t uncommon for individuals in Maryland to receive alimony payments as part of a divorce settlement. However, the tax treatment that those payments receive depends on when your divorce was finalized.
Was your divorce finalized before the start of 2019?
If your marriage was officially dissolved before the first day of 2019, alimony payments can be deducted by the person who makes them. The person who receives the payments must include them as taxable income. However, this means that spousal support can be used to save for retirement, to qualify for a loan or to qualify for federal income tax credits.
Was your divorce finalized after the final day of 2018?
Starting on the first day of 2019, alimony payments were no longer considered income to the person receiving them. Furthermore, the person making the payments could no longer deduct the amount sent to their spouses from their taxable income for the year.
The new rules might govern modifications to an existing agreement
Let’s say that your spouse agreed to increase the amount of support that he or she was willing to pay. The new agreement would be subject to the new tax rules if it specifically stated that the payments were not income to the recipient and deductible to the payee. Furthermore, the agreement would have to represent a change to the terms of an agreement reached prior to the end of 2018.
An attorney may be able to help you understand the potential tax consequences related to including spousal support in a final settlement. Your attorney may also be able to help you obtain ownership of a family home, child support payments or other resources that might make it easier to make ends meet on your own.