Guest post by Beth T. Vogelsang, Esquire, Florida Bar Board Certified Divorce, Marital and Family Law Attorney
On November 2, 2017, House Republicans released an income tax reform bill known as the “Tax Cuts and Jobs Act.” There has been much publicity about the bill’s proposed corporate tax cuts and the purported reduction and simplification of individual income tax rates. One provision of the 492-page bill, which has gone largely unnoticed, is the proposed repeal of the deductibility of alimony payments.
Current IRS Regulations on Alimony
Under current Internal Revenue Service (IRS) regulations, a person who pays alimony to a former spouse can deduct the payments on his tax return. The former spouse who receives alimony payments must report the payments as income on her tax return. Since the former spouse who is obligated to pay alimony will almost always be in a higher tax bracket than the recipient, deducting alimony payments will reduce the combined income tax liability of the former spouses resulting in greater cash flow for the family. Allowing the tax deduction of alimony was designed to lessen the burden of paying alimony in after-tax dollars, and to recognize that the payee should be regarded as having taxable income.
Potential Outcome
On November 9, 2017, the Senate responded by filing its own version of a tax reform bill. The Senate bill rejects the House’s proposal to eliminate the alimony tax deduction, and leaves the current law taxation of alimony payments intact.
If the House version of the Tax Cuts and Jobs Act is passed into law, alimony will no longer be tax deductible for divorces and separation agreements executed after December 31, 2017. The impact of this change is widespread and significant, as IRS statistics reflect that approximately 12 million tax filers claimed an alimony deduction in 2015. Tax reform and the financial consequences on divorce is an issue that warrants close monitoring. If you have any questions regarding the Tax Cuts and Jobs Act and its impact on alimony, please contact me at beth.vogelsang@henlaw.com or by phone at 239-344-1302.
About the Author
Beth T. Vogelsang handles family law matters in a confidential, compassionate and professional manner. She represents clients in complex divorces, including matters involving international and interstate child custody disputes, intricate business valuations, and identification and tracing of marital assets and income. She also drafts and litigates matters involving prenuptial and postnuptial agreements. Beth has been Board Certified in Marital and Family Law since 1992.
Beth has received much recognition for her work in the divorce and family law field. She has been included in Florida Super Lawyers magazine (2012-2017) and named one of the Top 50 Women Attorneys in the State in 2014 and 2015. Beth has also been included in Best Lawyers in America (2013-2017) and was named the “Fort Myers Family Law Lawyer of the Year” in 2015 and 2017. She is also AV rated by Martindale Hubbell.