How the New Tax Overhaul Removes the Alimony Deduction
Irrespective of your political persuasion, it is an inescapable fact that the GOP’s tax overhaul is the largest tax reform in a generation. As with any sweeping change to the federal tax code, the recent changes usher in sweeping reforms that have significant ramifications for most taxpayers. From federal income tax to property tax deductions, the changes are extensive to say the least.
That said, one of the more important changes that has arguably received too little attention is the removal of the alimony deduction for taxpayers.
New Tax Bill Eliminates Alimony Deductions
Although most family laws are made with the end goal of furthering marriage, the new tax plan may incentivize married couples to do the opposite. The new tax plan ensures that spouses who receive alimony are no longer required to pay taxes on alimony income if their divorce is finalized after 2018. Prior to the new GOP tax plan, alimony payments were considered to be deductible by the individual paying alimony. Further, the alimony received by an alimony recipient was considered income.
As such, payers of alimony could deduct the full amount paid to a former spouse, while a recipient spouse would pay a customary 15% tax rate on the alimony received. Now, the opposite will soon be the legal norm. The new system establishes a norm where paying spouses cannot deduct their alimony payment, as receiving spouses do not pay taxes on alimony received. However, these changes will not take effect for divorces finalized in 2018.
Since paying spouses naturally have an incentive to deduct alimony payments on taxes, it is quite likely that Florida and the rest of the nation may see an increased need to finalize divorces in 2018. Any Florida spouse who will pay alimony should understand that a finalized divorce prior to December 31, 2018 will result in tax-deductible alimony payments for the paying spouse. And, since alimony recipients tend to be in a lower income tax bracket, this means that more money will stay with the family unit as a whole instead of being sent to the federal government.
Florida spouses who fear these tax implications still have time to finalize their divorce before these tax ramifications take effect. Contact The McKinney Law Group for a legal consultation to discuss the facts of your Florida divorce in light of the new tax plan today.
Tampa Divorce Lawyer
If you have questions regarding a divorce attorney (Tampa, Florida), or are unaware as to the terms and conditions in, talk to, and retain, a family law attorney who can help. Contact Damien McKinney of The McKinney Law Group to discuss your case further. He can be reached by phone at 813-428-3400 or by e-mail at [email protected]