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Barbara L. Jouette, Attorney, P.C.
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Tax reform could change alimony

A federal tax reform bill is currently in the works that will make significant changes to existing tax policy. One of those changes is the elimination of the alimony tax deduction. If that change passes into law, experts say that it will drastically affect how divorce agreements are settled. Individuals in Texas who may be facing a divorce could potentially be affected if the divorce is finalized after 2017. 

Under current law, alimony payments are tax deductible for the payee. The person who receives the spousal support must claim that payment as income and pay income taxes. Government officials say that a discrepancy in the dollar amount of support payments deducted and the dollar amount claimed as income mean that the program isn't working and should be eliminated. Some critics of that belief say that tougher enforcement could potentially fix that issue. 

Spousal support payments are an important factor in many divorces, especially in high-income divorces in which one person has remained home to care for children. Some experts think that, if the law is changed, individuals will be less likely to pay as much support to their ex-spouses due to the tax burden of having to claim the income. This change could possibly leave lower-income earners without the support necessary to maintain their lifestyle after a split. 

Some lawyers in the midst of settling cases this year have been prompted to finalize them to get ahead of any changes. In Texas, alimony can be an important consideration for either party during a marital dissolution. Individuals facing spousal support concerns may wish to consult a family law attorney for more guidance about their options. 

Source: Reuters, "Is tax reform the final straw for alimony?", Beth Pinsker, Nov. 9, 2017

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