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Why new alimony tax laws may lead many to speed up their divorces

On Behalf of | Feb 23, 2018 | Alimony |

During the past 75 years, each state has been responsible for setting their own rules for how decisions regarding alimony awards would be made. This has made it difficult for legal experts to give a single answer about how its tabulated.

What hasn’t changed during this time, though, is how alimony has been dealt with by the Internal Revenue Service (IRS). Alimony payments have historically been tax deducible for the person paying it. The person receiving it has always had it taxed much like any other income. That’s all about to change though.

On Dec. 31, 2018, the Tax Cuts and Jobs Act will go into full effect. Once it does, the payer of alimony will no longer be entitled to deduct his or her payment. Spousal support recipients will no longer have to pay any taxes on the money they receive either.

This change in how alimony is taxed means brokering divorce settlements may get more difficult for attorneys to achieve. Many have only been successful in convincing their clients to go ahead and pay alimony because they could take it as a deduction on their taxes.

Now, with this new law set to go into effect, many legal experts note that some spouses may feel forced to stay in unhappy marriages instead of each going their separate ways. They argue that this may happen because of how unaffordable divorcing may become for the spouse having to potentially pay the alimony.

Since this would reduce the payer’s income, it also would, in turn, reduce the amount that the recipient would receive. Some argue that nobody will win once this law goes fully into effect.

Other experts argue that it’s likely that many couples will accelerate their plans to divorce as the effective date for this law inches closer and closer.

If you’re considering divorcing your spouse and requesting spousal support from him or her, then a Fort Myers alimony attorney can advise you about how this new law impacts you.

Source: CNBC, “Alimony tax changes may scorch divorcing couples,” Annie Nova, Feb. 16, 2018


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