Understanding how marital agreements affect taxes is essential for anyone navigating divorce, child custody, or spousal support in Georgia. At Hobson & Hobson, P.C., we leverage over 30 years of combined experience and advanced legal technology to guide clients through the complex tax implications of marital agreements. This article explores key facts, recent legal changes, and practical advice to help you make informed decisions about your financial future.
Marital Agreements and Their Tax Impact
Marital agreements — including prenuptial, postnuptial, and divorce settlements — directly influence your tax obligations. The most significant areas affected are alimony, property division, and child custody arrangements. Recent changes in federal law, especially the Tax Cuts and Jobs Act (TCJA), have dramatically shifted the tax landscape for divorcing couples.
Alimony: The New Tax Rules
Alimony tax treatment changed fundamentally in 2019. For divorce or separation agreements finalized after January 1, 2019:
- Alimony payments are no longer tax-deductible for the payer.
- Recipients do not report alimony as taxable income.
This change, enacted by the TCJA, remains in effect for 2025 and beyond. If your agreement was executed before 2019, the old rules may still apply — unless you modify your agreement and explicitly adopt the new law.
Practical Example: A Georgia couple divorces in 2025. The higher-earning spouse pays $2,000/month in alimony. The payer cannot deduct these payments, and the recipient does not report them as income. This can significantly affect negotiations and financial planning.
“For high-income individuals, this can be costly, as they must pay taxes on their full earnings before making payments. This change has influenced how divorce settlements are negotiated, with some spouses opting for lump-sum payments or property transfers instead of alimony.” — Forbes
Property Division: Avoiding Tax Surprises
Transfers of property between spouses as part of a divorce are generally not taxable events at the federal level. However, the recipient assumes the original cost basis of the asset. This means if you later sell the property, you may face unexpected capital gains taxes.
Little-Known Fact: If you receive the family home in a divorce, your future capital gains tax liability is based on the original purchase price, not the value at the time of transfer.
Child Custody and Support: Tax Credits and Deductions
- Child support payments are not deductible by the payer nor taxable to the recipient.
- The parent who claims the child as a dependent may be eligible for valuable tax credits, such as the Child Tax Credit.
- Only one parent can claim a child as a dependent per year. Your marital agreement should clearly specify who claims this exemption to avoid IRS disputes.
For more on child-related tax credits, see the IRS Child Tax Credit page.
Georgia-Specific Considerations
Georgia aligns with federal law on alimony and property division. The state does not tax alimony received, and Georgia courts may consider the tax consequences of property division and alimony when approving marital agreements. However, these consequences must be explicitly addressed in your agreement for the court to factor them in.
Unique to Georgia:
- The average alimony award duration is 3–5 years, but the new tax treatment has made lump-sum settlements more common.
- Georgia does not impose state tax on alimony received, further aligning with federal changes.
How Marital Agreements Affect Tax Filing Status
Your marital status as of December 31 determines your tax filing status for that year. If you are legally separated or divorced by this date, you can file as single. Married couples can file jointly or separately, with joint filing often resulting in lower taxes but shared liability.
For more information on filing status, visit the IRS Filing Status page.
Negotiation Strategies in Light of Tax Changes
The loss of alimony deductibility has shifted divorce negotiations. Many parties now prefer lump-sum settlements or property transfers to offset the tax impact. If you have a pre-2019 agreement, modifying it could change your tax obligations — so proceed with caution and consult a professional.
Professional Advice: Always consult a tax advisor or experienced divorce attorney before finalizing any marital agreement. At Hobson & Hobson, we help clients understand the full financial impact of their decisions, ensuring no costly surprises.
Recent Changes in Tax Law
The TCJA’s changes to alimony taxation remain the most significant recent development. No major Georgia-specific tax law changes affecting marital agreements have been reported for 2025. However, the IRS continues to update guidance, so it’s essential to stay informed.
For the latest updates, see IRS Divorce Tax Information.
Common Tax Pitfalls in Marital Agreements
- Pre-2019 Agreements: Retain the old tax treatment unless you modify the agreement and opt into the new rules.
- Capital Gains Trap: Property received in a divorce keeps its original cost basis, potentially leading to large capital gains taxes upon sale.
- Dependency Exemptions: Only one parent can claim a child as a dependent per year; unclear agreements can lead to IRS disputes.
Summary Table: Alimony Taxation (Federal & Georgia, 2025)
Divorce Finalized | Payer Deducts Alimony? | Recipient Pays Tax? | Georgia State Tax? |
|---|---|---|---|
Before Jan 1, 2019 | Yes (unless modified) | Yes | No |
After Jan 1, 2019 | No | No | No |
Why Choose Hobson & Hobson for Your Divorce and Tax Planning?
- Over 30 years of combined experience in complex divorce and custody cases
- Special litigation training for efficient, effective outcomes
- Client-focused approach balancing empathy with aggressive advocacy
- Five convenient Atlanta-area offices: Canton, Marietta, Alpharetta, Milton, Roswell, Duluth
- Commitment to innovation, leveraging technology for seamless legal solutions
We help clients make informed legal and financial decisions during challenging times. Our team stays current with evolving family law and tax regulations to protect your interests.
Learn more about our services at Hobson & Hobson, P.C..
Frequently Asked Questions
How do marital agreements affect taxes in Georgia?
Marital agreements impact taxes primarily through alimony, property division, and child custody arrangements. Georgia follows federal law, meaning alimony is not deductible or taxable for agreements finalized after January 1, 2019. Property transfers are generally not taxable, but future capital gains may apply.
Can I still deduct alimony payments on my taxes?
Only if your divorce or separation agreement was finalized before January 1, 2019, and has not been modified to adopt the new law. For agreements after this date, alimony is not deductible.
Who claims the child as a dependent after divorce?
Only one parent can claim a child as a dependent each year. This should be clearly specified in your marital agreement to avoid IRS disputes.
What should I consider before modifying a pre-2019 marital agreement?
Modifying your agreement could change the tax treatment of alimony. Consult a tax advisor or attorney before making changes.
Are there any Georgia-specific tax rules for marital agreements?
Georgia aligns with federal law on alimony and property division. The state does not tax alimony received.
For expert guidance on marital agreement tax effects and all aspects of family law, contact us at Hobson & Hobson, P.C.. We are committed to protecting your financial future and ensuring clarity every step of the way.
References & Further Reading:
- IRS: Alimony and Separate Maintenance
- Forbes: Alimony Tax Deduction
- IRS: Child Tax Credit
- IRS: Filing Status
- Hobson & Hobson, P.C.
Attorney Sarah Hobson at Hobson and Hobson, P.C. are powerful advocates for those who fight for better futures for those going through divorce and custody law matters.
