Tax Reform: How it will Impact Spousal Support/Alimony Payments

If passed, the new tax reform bill introduced by Republicans will have a profound impact on couples getting divorced because the right to deduct alimony (spousal support) payments will be eliminated.

Under current law, the spouse who pays alimony is allowed to deduct the amount of alimony paid from his or her income making it tax deductible. The recipient of the alimony must report the alimony as income for tax purposes. Under the current law, proposed section 1309 of the tax reform bill eliminates the deduction for payment of alimony (https://waysandmeansforms.house.gov/uploadedfiles/bill_text.pdf).

Though the proposed amendment would not affect alimony/spousal support orders that took effect prior to December 31, 2017, it would affect all orders made after January 1, 2018. If the bill is passed, it will have profound effects on the amount of alimony a former spouse is able to pay. The cost of divorce is already high and the cost of maintaining two households instead of one is often unmanageable. The elimination of the tax deductibility of alimony will only increase the difficulty in resolving divorce matters. It will be imperative that the divorcing couple devise creative solutions to maximize the financial benefits for the family.

About the Author

Rachel Castrejon opened her own law practice immediately after graduating from Loyola Law School and passing the California Bar exam in 1998. When she first opened her practice, she handled a variety of cases including wrongful termination, criminal appeals and family law matters. Ultimately, she chose to practice exclusively in the area of Family Law because she likes helping her clients through a very emotional process. Rachel’s goal is to help her clients through one of the most difficult times in their lives – the breakup of their family. Rachel understands the importance of achieving a resolution that is good for the entire family, particularly the children involved.

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Disclaimer: The information and examples provided herein are based on the laws and regulations at the time of writing. Prior to deciding how to hold title in your property, you should consult with an accountant, probate attorney or family law attorney to determine the best way to hold your property for the purpose you want to accomplish.