Recently, President Donald Trump signed the Tax Cuts and Jobs Act into law after it passed both houses of Congress. The bill is expected to have a major impact on many aspects of the U.S. economy. It will also touch other aspects of American life. In fact, the tax bill brings a major change to alimony, also known as spousal support.
Alimony deduction ends in 2018
Currently, the individual paying spousal support can deduct it from their taxes. The spouse receiving it pays income taxes on the spousal support. The new law eliminates the alimony deduction after December 31, 2018. The spouse receiving the alimony will not need to pay taxes on it.
The change will have a significant effect on individuals paying spousal support. As a result, the new law may reduce the amount of money allocated between divorcing spouses. Without the ability to deduct alimony from taxes, higher-earning spouses may need to fight high alimony aggressively.
Ramifications still unclear
Because of the changes, certain states may alter their spousal support guidelines, likely by lowering the recommended amount of alimony to account for the deduction loss.
Another issue is that some couples have alimony provisions in their prenuptial agreements that assume a tax deduction. This may lead to some people needing to file a petition with the court to rt.
Both the American Academy of Matrimonial Lawyers and the National Organization for Women opposed the change in alimony deduction.
The new tax bill will have major implications for individuals in the process of divorce. Those concerned about how the tax changes will affect them should speak to an experienced divorce lawyer.