{"id":2203,"date":"2018-01-03T06:49:40","date_gmt":"2018-01-03T14:49:40","guid":{"rendered":"http:\/\/springwaterwealth.com\/?p=2203"},"modified":"2018-01-03T06:49:40","modified_gmt":"2018-01-03T14:49:40","slug":"the-impact-of-the-new-tax-law-on-divorce-and-alimony","status":"publish","type":"post","link":"https:\/\/springwaterwealth.com\/the-impact-of-the-new-tax-law-on-divorce-and-alimony\/","title":{"rendered":"The impact of the new tax law on divorce and alimony"},"content":{"rendered":"

Congress passed the \u201cTax Cuts and Jobs Act\u201d in late 2017. The legislation can be found on the House Ways and Means website<\/a>.<\/p>\n

The Act changes the tax treatment of spousal support (or “alimony”) payments in one important way. Under the new rules, alimony is no longer deductible for the payor, and money received as alimony is no longer taxable income for the payee (having already been taxed as the payor\u2019s income). The new rules apply to divorces finalized after December 31, 2018. Existing settlement agreements are grandfathered in and are therefore unaffected.<\/p>\n

Essentially, the prior rules allow divorced couples to shift taxable income from the payor to the payee. As a rule, alimony is a series of payments from the ex-spouse with higher income to the ex-spouse with lower income, and being able to shift the income to payee\u2019s (presumably lower) tax bracket allows ex-spouses to lower the overall tax liability arising from the income being paid as alimony.<\/p>\n

Under the old rules, for income tax purposes, alimony was deductible by the payor and includible in the gross income of the payee. However, simply labeling a payment as “alimony” does not mean it will be treated that way for tax purposes. Regardless of its designation or by court order or agreement between divorcing spouses, to be treated as alimony for tax purposes, the requirements of Internal Revenue Code section 71(b) must be met. Alimony is any payment in cash if:<\/p>\n