Losing the alimony deduction will be a financial hit for many

Many Florida spouses have grown used to the tax deduction that comes with paying spousal support. It can certainly take some of the sting out of those payments and is a welcome relief at tax time. The newly signed tax reform package, however, eliminates the alimony tax deduction. That will change the financial landscape for many divorced spouses and could also lead some married folks to seriously consider filing for divorce. 

The change won’t go into effect until 2019, so couples in rocky relationships have nearly a year to determine if staying the course is the wise thing to do. If they file now, the alimony tax deduction will be grandfathered in. If they wait until this time next year, the paying spouse will lose the tax deduction entirely. 

The change helps the IRS collect more in tax revenue. Under the current rules, the party-paying spousal support gets a dollar-for-dollar tax deduction. The spouse receiving spousal support has to pay taxes on the amount received. However, because of the different tax rates of a higher-earning spouse and a lower-earning spouse, the IRS loses out. 

For Florida couples who are considering divorce, it might be a good idea to buckle down and determine if the marriage is salvageable. If the end result is going to be a divorce, it might make more sense to pull the plug in 2018 and retain the alimony deduction. It is also entirely possible that divorce attorneys will become inundated with new divorce filings as the year progresses. 

Source: fa-mag.com, “Tax Law Brings Big Tax Changes For Alimony Payers“, Jeff Stimpson, Jan. 22, 2018