Repeal of deduction for alimony payments. One year delay in implementing.
So under the new tax plan approved by Congress (awaiting presidential approval) alimony will NOT be tax deductible. A strange result given that our president is on his third wife and reportedly paid hundreds of thousands of dollars in alimony to his former wives.
What does the new tax bill do? Compare the current law and the tax law as approved by the House and Senate.
CURRENT LAW: Alimony and separate maintenance payments are deductible by the payor spouse and includible in income by the recipient spouse. Child support payments are not treated as alimony and is tax neutral.
PROPOSED LAW: (about to get signed) Alimony and separate maintenance payments are NOT deductible by the payor spouse and repeals the Tax Code provisions that specify that alimony and separate maintenance payments are included in income. The treatment of child support is not changed.
WHEN IS THIS EFFECTIVE? When signed by the president. this change becomes effective for any divorce or separation agreement entered after December 31, 2018, or for any divorce or separation instrument executed on or before December 31, 2018 and modified after that date, if the modification expressly provides that the amendments made by this section apply to such modification.
WHAT DOES THIS MEAN? It means there will likely be a lot of arguing in court over this issue and re-reading and re-interpretation of tax provisions in old settlement agreements about taxes! Hopefully the state legislatures will also address this issue - luckily the new provisions will take another year before they become effective.
What does the new tax bill do? Compare the current law and the tax law as approved by the House and Senate.
CURRENT LAW: Alimony and separate maintenance payments are deductible by the payor spouse and includible in income by the recipient spouse. Child support payments are not treated as alimony and is tax neutral.
PROPOSED LAW: (about to get signed) Alimony and separate maintenance payments are NOT deductible by the payor spouse and repeals the Tax Code provisions that specify that alimony and separate maintenance payments are included in income. The treatment of child support is not changed.
WHEN IS THIS EFFECTIVE? When signed by the president. this change becomes effective for any divorce or separation agreement entered after December 31, 2018, or for any divorce or separation instrument executed on or before December 31, 2018 and modified after that date, if the modification expressly provides that the amendments made by this section apply to such modification.
WHAT DOES THIS MEAN? It means there will likely be a lot of arguing in court over this issue and re-reading and re-interpretation of tax provisions in old settlement agreements about taxes! Hopefully the state legislatures will also address this issue - luckily the new provisions will take another year before they become effective.