As Florida residents debate the recently proposed GOP tax cuts, they may want to take a close look at the provisions within the proposal. One of the ways that Republican lawmakers plan to pay for tax cuts is by eliminating the tax deduction for alimony payments. That can make a big difference in the bottom line for many Americans.
Currently, individuals who make alimony payments are able to reduce their taxable income dollar for dollar. If that tax deduction is eliminated, estimates suggest that the government will gain nearly $8 billion over the next 10 years. That could change the negotiation tactics used in divorce cases across the nation.
On the flip side, spouses who expect to receive alimony payments would no longer need to declare those payments as income. That could lead to a tax bill reduction for alimony recipients. It is unclear how this change could impact the calculation of child support, which is often tied to alimony negotiations. That said, the issue could certainly complicate divorce negotiations, since the paying party may want to recover his or her lost tax savings through other means.
It’s also important to note that many states have guidelines and laws concerning spousal support that are based on the fact that those payments are tax-deductible. If the tax deduction goes away, it’s likely that those laws would need to be readdressed. For Florida spouses who are considering how the currently proposed tax bill could impact their own alimony scenario, it may be helpful to contact a family law attorney.
Source: bloomberg.com, “The GOP Tax Plan Could Make Your Divorce More Expensive“, Tom Metcalf and Christie Smythe, Nov. 8, 2017