Come Jan. 1, the Tax Cuts and Jobs Act will go into effect. Once it does, an alimony-paying spouse will no longer be able to take a tax deduction for making such a payment on their yearly tax filing.
Up until this act was passed last year, paying spouses had been allowed to a deduction for the amount that they paid for several decades. The Internal Revenue Service (IRS) required the recipient spouse to declare any monies received as taxable income in return.
Now, once this act takes effect in the next few weeks, alimony will start being treated much like child support payments in that they won't be taxed. Paying spouses won't be able to deduct what they're required to remit either. This is all part of a republican effort that seeks to award higher standard deductions in lieu of smaller, itemized ones.
One legal analyst suggests that many of the paying spouses may be forced into a higher tax bracket by not being able to deduct the alimony that they pay. This may leave them paying much higher taxes as a result.
Couples considering getting divorced may want to go ahead and push to work out an agreement that can be submitted to and approved by the court on or before Dec. 31. This will ensure that a paying spouse will continue to be able to deduct alimony payments when filing their yearly tax return.
With the hustle and bustle of the holidays, it may not feel like the right time to decide to pull the plug on your marriage. If you've long been separated and simply waiting for the ideal time to do so, then there may be no better time than now to wrap things up. A Fort Myers alimony attorney can counsel you about how this new act may affect your divorce case and your finances as a result.