Consequences to New Tax Law on the Deductibility of Alimony

Consequences to New Tax Law on the Deductibility of Alimony

The most recent tax bill includes the elimination of the alimony deduction that’s been in place for the past 75 years, beginning January 1, 2019. 

Whether you’re the breadwinner or the stay-at-home spouse, if you’re contemplating divorce and spousal support is likely to be paid from one party to the other as a consequence, it will benefit both parties to sign a Marital Settlement Agreement establishing the amount and duration of spousal support to be paid no later than December 31, 2018.

The reason is that the paying spouse will no longer be able to deduct spousal support payments from his/her income—meaning those dollars will be taxed at the higher earner’s rate and there will ultimately be less money available to divide between the two former spouses.  In other words, the Federal government is taking a bigger cut of the cash.

The American Bar Association published a recent article suggesting that the new change will cause a surge in divorces in 2018:  http://www.abajournal.com/news/article/new_tax_law_affects_alimony_could_spur_divorce_surge

Consequences to New Tax Law on the Deductibility of Alimony
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