Greenville, SC- There’s plenty in the Republican tax reform bill introduced last week to make some taxpayers happy and others very unhappy. One group of taxpayers who may be dissatisfied with the legislation if it passes is divorcees who pay alimony or receive it. The alimony deduction is one of the many that could get dropped in the final tax reform bill Congress is hoping to pass before the end of the year.
Republican Tax Reform Bill Could Eliminate the Alimony Tax Deduction
Republicans are still fine-tuning the Tax Cuts and Jobs Act, so it is unclear which deductions will get the ax, but there is a relatively long list. Popular tax breaks like the student loan deduction, the healthcare expenses deduction the mortgage deduction could disappear. The alimony deduction is also on the chopping block.
CNBC, reports that 598,888 taxpayers took the alimony deduction in 2015 to the tune of $12.3 billion. Not surprisingly, there is a billion discrepancy between the amount of alimony deductions taken and the amount of alimony reported. According to CNBC, deductions for maintenance totaled $10 billion, but $2.3 billion of those payments were not reported on individual tax forms.
Both sides lose if the deduction is dropped. Under current tax laws, the ex-spouse paying alimony gets to deduct the amount from their taxes and the ex-spouse receiving the payments reports the payments as income and pays the taxes. Alimony is awarded to a lesser earning spouse to prevent them from sliding into poverty.
With the deduction gone, the person paying alimony would see a significant increase in their yearly tax bill.
Lesser earning spouses who depend on alimony to survive could be getting smaller payments. Divorce attorneys anticipate smaller alimony awards with deduction gone. When judges are determining how much to award a spouse, they consider the income and other financial burdens of the payee including their federal and state taxes. If the payee faces a high tax bill, a judge can decide to award less to the spouse receiving alimony.
You Need a Divorce Attorney in Greenville
If you are getting a divorce and have questions about alimony, child support, and property division, let USAttorneys.com connect you with a lawyer. You can arrange a consultation with one of our divorce attorneys in Greenville. They will assist you with the following divorce-related issues, and more:
Filing your initial divorce petition
Outlining your requests for child custody, child support, and alimony
Negotiating a divorce settlement with your estranged spouse and their attorney
Changing the terms of divorce including having alimony payments increased or reduced
Understanding the tax implications of divorce and alimony
Are you considering divorce? Do you have questions about alimony? Child custody and support? Property division? Getting a divorce will change your life drastically, so you need to enter the process aware and fully informed about the process and possible outcomes. You can get the information you need by contacting the Greenville Law Offices of Linda C. Hayes at 864-233-3100, and set a case consultation.