Today:
Spouse Paying alimony can deduct the amount paid
Spouse Receiving alimony pays tax on the amount received
New Tax Law:
Spouse Paying alimony CAN NOT deduct the amount paid
Spouse Receiving alimony DOES NOT pay tax on the amount received
Example:
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
Who does this affect
About 800,000 couples divorce each year
Affects divorce decrees entered into
after Jan. 1, 2019
Example of what lawyers love:
Some prenuptial agreements have alimony provisions that assume the tax deduction,