Starting on the first day of 2019, new Virginia divorcees will be bound by new tax rules. Specifically, alimony is no longer a tax deduction to the person making the payment. Furthermore, the ex who receives the payment will no longer have to consider it to be income. It’s important to note that these new rules take effect only for divorces settled after Dec. 31.
It is important to understand that the change in alimony tax treatment won’t necessarily be a bad thing for everyone. Instead, it will require a change in strategic planning when negotiating a divorce settlement. For instance, it may be worthwhile to ask a spouse to pay a share of what an asset (like a house) is worth. However, there may be fewer protections compared to if the proceeds are labeled as alimony.
If the payee goes bankrupt, it may signal the end of property division payments. To avoid that possibility, a person can agree to take a lump sum payment in lieu of alimony or other financial assistance. In some cases, this will help to settle a divorce in a timely manner.
Working with a family law professional can help one obtain a favorable divorce settlement. This may involve receiving alimony, lump sum monetary payments or a larger share of marital assets such as an IRA or brokerage account. Obtaining these assets may make it easier to maintain a reasonable standard of living on a single income. An attorney could represent an individual during mediation sessions or during a formal divorce trial.