Divorce and taxes: two of the least favorite things for many Americans. Most people want their marriages to work and they don’t plan on a divorce when entering their marriages. And nobody in the world likes to pay taxes.
The one bright spot in divorce was that the spouse making alimony payments would at least get a deduction on the payments. Not for long.
New Tax Plan to Tax Paying Spouse for Alimony Payments
Friday, December 22, 2017, President Donald Trump signed the new US tax bill into law, according to CNN News.
Further, AP News claims that “One provision scraps a 75-year-old tax deduction for alimony payments” and explores the consequences of this provision.
Currently, and for a long time, the spouse paying alimony could deduct these payments when filing their tax returns. In this paradigm, spouses receiving the payments are taxed on them. But with the new plan, the receiving spouse will not be taxed, but the paying spouse will.
Concerns About this New Plan
There are always concerns when new legislation comes down from Washington, and this current tax plan is no exception.
The first concern, as is always the case with new legislation, involves the complications that these changes will nave for divorcing parties and their attorneys. Negotiations become more complicated for sure, and it will take time for everyone to fully understand how the tax plan will have to play out in actual divorces.
Another problem is that, at least according to AP News, this plan will result in less overall money per dollar actually ending up in the alimony recipient’s hands. Of course this is not desirable. Further, it hinders negotiations as there will be less bargaining room when it comes to alimony.
There is nothing we can do to change the new tax law in the near future. The only thing you can do is work with an attorney who understands these new laws and their implications – someone who can protect your interests in the ever-changing landscape of divorce and tax law.