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How the tax overhaul will affect spousal support deductions

The new tax overhaul will remove a 75-year-old tax deduction for alimony payments. The new rule will not affect anyone who divorces prior to 2019; however, it will certainly change divorce negotiations.

What's changing? Currently, the spouse paying alimony can deduct it from their taxes and the spouse receiving the alimony pays taxes on it. The idea is that the payer is generally in a higher tax bracket. Thus, with the alimony deduction, they are paying less tax. The payee is generally in a lower tax bracket, and pays less tax on the income received. The current setup preserves more money amongst the ex-spouses. The new rules will result in alimony recipients receiving 10-15% less than what they would receive under the current law, and more money to be paid in taxes.

For more information on the consequences of the tax changes, contact SMDA, PC at (586) 264-3756.

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