The House of Representatives introduced their proposed Tax Bill yesterday, which includes a lot of changes and the end of many income deductions. One such proposed repeal was the alimony deduction. Under the current tax law, a payor of alimony deducts the amount paid from his or her taxable income. The payee includes the alimony in the payee’s taxable income. The new law, if passed, gets rid of this alimony deduction, so the payor still has to pay the taxes on that money.
The good news is that this law, if passed, will apply only to couples that sign separation agreements or have their divorce decree entered after December 31, 2017, so all of the alimony payment schemes currently in place or finalized this year will not be affected.
People who modify their alimony payment schemes after December 31, 2017 will have the option to partake in the new law, if passed. Only modifications that expressly provide that the new law will apply will subject the alimony payor to pay taxes on the alimony.