A proposed tax overhaul was delivered to President Donald Trump who promptly signed it into law. The tax plan is set to touch every facet of life, including spousal support. The 75–year old tax deduction, sacred to those who pay alimony, will be scrapped effective January 1, 2019. In California and every other state, divorce negotiations may be harder and may lead to less alimony being paid.
Under the current plan, spouses paying alimony can deduct from their taxes the amount paid at the end of the year. The spouse on the receiving end currently pays taxes on the money. With the new proposal, the payer cannot reap the benefits of a tax deduction, and the spouse receiving the payment will no longer be required to report it as taxable income.
Many of those who receive alimony may have given up a career to invest time into raising a family. While statistics may vary, the Census Bureau stated that most people who received spousal support last year were women. It is reported that with the current tax setup, more money is allocated between couples allowing them to live separately.Critics are afraid that without the tax break incentive, the higher-earning spouse will be less generous during divorce negotiations.
Some experts suggest that alimony should fall into the same non-tax category as child support. Others claim divorce cases will become much more difficult to settle without this tax perk. In California, for those who have questions, an incisive divorce attorney can address concerns about spousal support and the impact the new tax laws will have on divorcing couples.
Source: lancasteronline.com, “Exes and taxes: How the tax overhaul will alter alimony”, Jennifer Peltz, Dec. 22, 2017