Know Someone Getting Divorced? Here is what they should know about a possible tax law change for alimony payments…
Posted: November 14, 2017
Alimony is a series of payments that are sometimes paid from one ex-spouse to the other ex-spouse after a divorce. Currently, the person making alimony payments gets to deduct those payments from their taxable income, and the person receiving the payments needs to report the payment as income.
The Tax Act proposed by the House (but not the bill proposed by the Senate) would reverse the taxation of alimony payments for new divorces (currently divorced persons are expected to be grandfathered under the old law). If passed, the person making the alimony payments would not be able to take a tax deduction for the payments, but the person receiving the payments would not need to report the payments as income. This would significantly shift the financial consequences of alimony payments.
Tell your friends and family that anyone currently negotiating a divorce settlement should be aware of this possible change so they can keep it in mind during negotiations.