Wait. I thought I could deduct my alimony payments?Submitted by Financial Planning Solutions, LLC on January 4th, 2018
Alimony also known as "spousal support" is money that one spouse pays another. Usually on a monthly basis for a set period of time.
Generally speaking, the spouse that receives alimony (usually the lower income spouse) pays taxes as ordinary income on the money received. The payor of alimony (usually the higher income spouse) gets a deduction on these payments.
This has generally worked well as it provides some relief for the higher earner and it wasn't generally a big hit to the one receiving alimony tax wise (unless of course it was a high stakes divorce)
That is, up until now.
The new tax law that recently passed provided provisions to change all of this. Alimony will no longer be deductible to the payor or reported as income to the payee. These new rules pertaining to alimony payments going forward will only apply to divorce agreements after December 31st of 2018.
Thinking of getting divorced this year? You may want to speed things up if you are paying alimony and you may want to drag your feet if you are receiving it.
Time will tell how this plays out and what changes we might see in asset division due to this new tax law.
Bear in mind, child support, does not have the same rules as alimony. It is now (and this hasn't changed) not deductible to the payor or taxable to the payee.
Any questions, I'm here to help.
All the best.
Rick Fingerman, CFP®, CDFA®, CCFS®
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