By now, we have all heard bits and pieces of the sweeping tax plan proposed by Republican lawmakers. Interestingly, there is a significant provision that will affect divorcing couples. Whereas current tax law allows the payor spouse to deduct alimony payments and requires the payee spouse to pay taxes on alimony received, the proposed tax plan would eliminate the deduction to the payor and the taxability to the payee. In effect, the payor spouse would pay alimony with after-tax dollars. This provision would raise tax revenue in order to pay for other tax cuts. If the tax plan passes as proposed, the repeal of deduction for alimony payments would be effective for any divorce decree or separation agreement executed after 2017. This article provides examples of the effect on a divorcing couple.
