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Tax Reform Eliminates The Tax Deduction For Alimony Payments

Under the new tax bill signed into law by Trump, alimony paid by one spouse to the other will not be tax deductible, and the spouse receiving the alimony is no longer required to pay taxes on alimony. In the current system, it works the opposite way, with the payer deducting the full amount and the recipient paying taxes on the alimony at a rate of 15%. Some divorce lawyers say the current setup tends to preserve more money overall to allocate between spouses, helping them afford living separately. Others argue that the government will end up with more of a divorcing pair’s combined income. The new rules won’t affect anyone who divorces or signs a separation agreement before 2019. Critics fear that without the deduction, higher-earning spouses won’t pay as much to their exes. Even though alimony is just one of many factors in divorce, it is a highly contentious topic that is changing drastically. Due to the length of time it takes to finalize a divorce in Alabama and the new law taking effect January 1, 2019, anyone considering a divorce should contact us today for an immediate consultation.