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New federal tax law will affect future spousal maintenance awards

Spousal maintenance, traditionally called alimony, is the payment of support from one ex-spouse to the other after divorce. Texas has arguably the most stringent maintenance laws in the country, so whether you would be the paying spouse or the recipient, it is important to enlist an experienced family lawyer to advocate for a fair award in compliance with the law. 

Texas alimony eligibility is narrow 

If the question of spousal maintenance is decided in court, Texas statutes limit an award to narrow circumstances in which the potential recipient cannot provide for his or her own minimum reasonable needs, combined with another significant factor like incapacitating disability, family violence, a 10-year marriage plus inability to earn enough money to provide for minimum reasonable needs, or recipient care of a disabled child of the marriage preventing sufficient earning capacity.

The amount and duration of a maintenance award are also limited by statute. 

Maintenance by agreement 

In a financially prosperous marriage, the potentially receiving spouse will usually be able to meet his or her own minimum reasonable needs, so an award in court is less likely. However, often the parties agree between them that maintenance is appropriate. In those cases, the parties may enter into a settlement agreement in which they may negotiate spousal maintenance terms of their own choice, even if a judge or jury would not be able to award the negotiated arrangement if he or she were deciding it in a contested divorce.

The impact of the new tax law 

One factor that has been important for 75 years in negotiating spousal maintenance (or advocating before a judge or jury) is that the paying spouse may deduct maintenance paid on his or her taxes and the recipient must report it as income. 

The new federal tax reform bill will drastically change this, which may affect how much a payor is willing to agree to pay in a settlement. Specifically, beginning with divorces in 2019, paid maintenance will no longer be deductible and received maintenance no longer taxable income. 

Existing divorces and those finalized in 2018 will not be affected by the change. 

Legal advice important 

A Texas divorce attorney can advise anyone contemplating divorce about this new law. It may be advisable to finalize the divorce before 2019 in order to fall under the existing tax law, depending on the circumstances. 

A family lawyer will also closely follow related developments. For example, will the Texas legislature respond to the federal change by amending Texas maintenance law? How will the change affect child support, since the spouse who makes more and would likely pay alimony and probably child support would have less money if he or she could not deduct the maintenance? 

We are entering uncharted waters regarding maintenance. An attorney will help his or her divorce clients to positively negotiate the changes.



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