Divorcing couples and their family law advisers are scrambling to cope with the possibility that alimony won’t be tax deductible for divorce agreements signed in 2018.
Here is the difference repeal would make: Alimony, also called maintenance, is typically used when one spouse of a divorcing couple earns far more than the other. Alimony payments continue for a period of years and help defray the expense of splitting one household into two.
In its version of the tax-overhaul bill, the House of Representatives included a provision repealing the current treatment of alimony for divorce agreements signed after 2017. The change is projected to raise $8.3 billion over 10 years.
Careful family law attorneys also are including language to address the potential change in the law.
If the alimony deduction is repealed, one beneficiary would be the IRS. It will no longer have to police a large tax gap between what is deducted by alimony payers and what is reported by alimony recipients.
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