As we continue our effort to break down the details of the proposed new tax law, we would like to focus on the changes affecting alimony payments.
Under the current law, generally, alimony is tax deductible to the paying spouse and taxable to the receiving spouse.
Typically, the payer is in a higher bracket than the recipient, which allows for some tax planning in the alimony calculation. Under the proposed new tax law, however, alimony will no longer be tax deductible to the payer. On the other side, the recipient will no longer pay tax on the alimony received.
The law would apply to all divorces finalized after December 31, 2017. It is estimated that the new provision would add $8.3 billion to the government’s coffers over the next 10 years.
Should you have any questions, please feel free to call or email your Louis T. Roth & Co. advisor.