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How will the tax changes to alimony affect divorcing couples?

Just before their holiday break, Congress passed and President Trump signed the much-talked-about and highly-debated tax reform bill. Among the changes in the sweeping bill is that alimony will no longer be a factor when divorced people file their income taxes, whether they are paying it or receiving it. It will be a non-issue to the Internal Revenue Service, just like child support is.

However, the change, which does away with the 75-year-old tax rule that allows these deductions for the payer and lets the recipient claim it as income, will have a significant impact on many divorcing couples.

Opponents of the bill argue that those paying alimony won't be the only ones hurt. Those receiving alimony (98 percent of whom are women) could likely end up getting less.

Divorce attorneys point out that people required to pay alimony will fight harder to keep those payments as low as possible, since they won't get the tax deduction that helps make these payments less of a financial hardship. For many Americans, that deduction is well into the thousands annually. One attorney predicts that people who receive alimony could get as much as 15 percent less than if the change hadn't been implemented.

Those who supported the change, including the Ways and Means Committee, which is in charge of tax legislation in the House of Representatives, argued that the tax deduction for alimony gave an unfair benefit to divorced couples over married ones. The committee referred to the deduction as a "divorce subsidy."

It seems doubtful, however, that the change in the tax code will significantly impact America's already-declining divorce rate. As one lawyer notes, "I've never heard a couple say that they're getting divorced for tax reasons."

If you're planning to divorce and are concerned about how this tax bill may impact your request for or payment of spousal support, your Florida family law attorney can provide information and guidance.

Source: USA Today, "Exes and taxes: How the tax overhaul would alter alimony," Jennifer Peltz, The Associated Press, Dec. 24, 2017

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