Many Florida spouses are carefully watching the progression of the Republican tax plan. There are numerous controversial aspects of the plan, but one that has sparked debate involves the elimination of the alimony tax deduction. That could change the financial landscape for hundreds of thousands of Americans, which is an unwelcome change in many households.
Currently, the spouse who is tasked with making alimony payments is able to deduct those payments from his or her taxable income. The recipient, on the other hand, is required to claim alimony payments as income and expected to pay the appropriate taxes. This differs from child support, which is tax neutral in either direction.
Being able to deduct alimony payments can help sweeten what, for many, is a bitter pill to swallow. If the currently proposed tax bill should pass, that would mean an increased tax burden on all spouses paying alimony. Recently, the American Academy of Matrimonial Lawyers came out in opposition to the proposed changes. Many taxpayers across the nation have contacted their representatives to voice their opinions against eliminating the alimony deduction.
As the Republican tax bill moves through the legislative process, Florida residents will likely pay close attention. Losing the alimony tax deduction would deliver a serious blow to many middle income earners. It could also, many fear, create acrimonious divorce negotiations as couples struggle to offset an increased tax burden on the paying spouse. Divorce is challenging enough without adding an additional layer of financial stress to the negotiation process.
Source: cbsnews.com, “GOP plan to cut alimony tax deduction has some divorcees on edge“, Nov. 16, 2017