Congress’ giant tax overhaul is poised to reach virtually every corner of American life – even Splitsville.
Republicans delivered their sweeping plan to an exultant President Donald Trump, who signed it into law Friday.
One provision scraps a 75-year-old tax deduction for alimony payments.
The new rules won’t affect anyone who divorces or signs a separation agreement before 2019.
In any divorce commenced after December 31, 2018, the spouse paying alimony can’t deduct it, and the spouse receiving the money no longer has to pay taxes on it. Now, it’s the opposite.
Divorce lawyers say the current setup tends to preserve more money overall to allocate between spouses, helping them afford living separately.
‘This is something that was very helpful in settling divorce cases,’ says Jef Henninger, a New Jersey matrimonial lawyer.
magine 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.
Tom Leustek estimates the deduction saves him about $5,000 a year – ‘not a trivial amount to me,’ the New Jersey plant biology professor says.
‘The person actually getting the money should be the one who pays taxes on it,’ he says.
The Census Bureau says 243,000 people got alimony last year, 98 percent of them women.
Is this some kind of white-knighting on the part of Republicans? Why should men lose the deduction and women who receive payments not have to pay a tax? It was fairer before, though frankly I believe alimony is a dinosaur that should die a quick death in most cases.