How the New Tax Plan Effects Alimony (Part 2)

Beginning Jan. 1, 2019, the paying spouse will not be allowed to deduct his or her alimony payments.  Likewise, the spouse receiving the payments, will not be required to report the alimony payments as income.

So, what does this look like math-wise?

Show me the math. Imagine high-earning Spouse A now pays and deducts $30,000 a year in alimony. Spouse A’s income is federally taxed at 33 percent, so the deduction saves him $9,900.

Lower-earning Spouse B owes taxes on the alimony at a 15-percent rate, paying $4,500 instead of the $9,900 that would be due at Spouse A’s rate. The two have saved $5,400 between them, and Spouse A got a break that makes the payments more affordable.

Source: The Washington Post

So, if you are currently paying or receiving alimony, call me to see if you need to go back to court to recalculate your alimony payments.