The House Republican tax plan proposes eliminating the tax deduction for ex-spouses making spousal support payments effective Jan. 1, 2018. Current alimony recipients will no longer be required to pay taxes on any payments made to them. In California, the proposed bill may increase a family's tax burden causing serious financial concerns. If the bill passes, ex-spouses will be ready to renegotiate their alimony agreements with the court system.
During divorce negotiations, alimony has become an essential tool for spouses adjusting to altered economic reality. The elimination of the alimony tax will make harsh and stressed discussions between couples even worse. Experts fear that the tax change could make it problematic for divorced individuals to get the support they have been awarded. The financial fallout for parties post-divorce could mean less money available for ex-spouses and their families.
Suppose a man has an annual income of $90,000 and pays $20,000 to an ex-spouse in alimony. Under the current tax plan, he could deduct that $20,000 from his annual income. This would lower his tax bill to $13,245 creating a substantial decrease of $5000. Paul Ryan, a U.S. House Speaker, claims the overall tax legislation would cut taxes and simplify the entire system.
Trying to negotiate fair terms during a divorce can be difficult for all parties involved. Taking away valuable deductions may cause added concerns of higher taxes for men who pay the majority of alimony. Those in California with alimony concerns may benefit from the advice of a seasoned, well-versed attorney to answer questions they may have.
Source: mercurynews.com, "Alimony deduction eliminated in House Republicans' tax plan", Dave Collins, Nov. 16, 2017