When getting divorced in New Mexico, some couples have historically agreed that one spouse will pay alimony to the other for a period of time after the divorce is finalized. These monies are generally considered a way of assisting the person who earns less money while they adapt to living on a reduced income. The person who receives spousal support payments has added these payments to their income tax return as actual income. The person who makes the spousal support payments has been able to deduct the money from their income tax return.
For paying spouses, the ability to get a deduction on their tax returns has eased the pain of paying alimony. This will still be the case but only for divorces that are completely finalized and signed off by a judge on or before December 31, 2018.
As reported by Bloomberg, changes to the tax laws include changing how taxes are applied to alimony payments. Starting January 1, 2019, the person who receives alimony will not pay taxes on the income. Instead, the other spouse must both pay alimony to their former partner and pay taxes on the money to the government.
This change may well result in divorce settlements being different than they would otherwise have been since the paying spouse may understandably be less willing to agree to make spousal support payments when they also have to pay the taxes on those funds. The amount of alimony might be reduced or the length of time that payments are made may be cut down.