How Will the New Tax Laws Affect Divorcing Texans?

November 21, 2018

New tax laws for divorcing couples in Texas are just on the horizon starting January 2019. The Tax Cuts and Jobs Act was approved by Congress in December 2017, implementing future changes regarding the deductibility of spousal maintenance.

Currently, Texas has limited circumstances for spousal maintenance. A lower-income earning spouse who was married more than 10 years but less than 20 can receive support for up to 5 years; married more than 20 years but less than 30 can receive support for up to 7 years; and married more than 30 years can receive support for up to 10 years. Up until the end of this year, higher-income earning spouses can deduct these support payments based on his or her tax rate, while the lower-income earning spouse pays taxes on the gross amount of support received.

If you plan on finalizing your divorce that includes spousal maintenance after the end of 2018, the Tax Cuts and Jobs Act will not allow the higher-income earning spouse to deduct these support payments from his or her taxable income, and the recipients of the payments will not have to report the income or pay taxes on the amount. This law will likely lead to changes on how divorcing couples divide their assets, potentially forcing them to devise an unequal property settlement to compensate for the tax changes. Therefore, getting your divorce ducks in a row now before the end of 2018 would be beneficial before you are forced to duck and cover from the new tax laws.