How GOP Tax Reform Effects Your Divorce

How the GOP’s Sweeping Tax Reform Bill Effects Your Divorce:
Much has been made of the recent tax reform bill that was passed by Congress. No matter which side of the political spectrum you fall on, everyone must adapt and adjust to the new tax bill. One major change to the Tax Code is the removal of the deduction for alimony/spousal support payments.
For 75 years the Tax Code has allowed a deduction for the person making alimony/spousal support payments. This deduction was codified in Section 215 of the Tax Code, which stated that there shall be allowed as a deduction an amount equal to the alimony or separate maintenance or support payments made during an individuals taxable year. Thus, if a person was paying $2,000.00 per month in spousal support, then that person would be able to deduct $24,000.00 from their gross income at the end of the tax year. Obviously, this deduction made giving money to an ex-spouse a little easier to stomach.
That has all changed with the GOP’s recent tax bill. Section 11051 of the new Tax Bill repeals Section 215 of the Tax Code, which allowed for alimony or spousal support payments to be deduction from gross income. Alimony is defined in the Tax Bill as money that is received by a spouse under a decree of divorce or other separation instrument-provided that-the payor spouse and payee spouse are not members of the same household, and there is no obligation of the payor spouse to continue to making payments after the payee spouse dies. Therefore, with the passing of the bill, people who are paying alimony or spousal support will no longer be allowed to deduct the amount that they paid in support during the tax year.
So how does this effect your divorce? Well, the answer put simply is it doesn’t . . . right now. Section 11051 does not take effect until January 1, 2019. Thus, if you are currently paying spousal support to an ex-spouse pursuant to a divorce decree, then you are grandfathered into Section 215 of the Tax Code, and can continue to deduct your spousal support payments in perpetuity. Furthermore, any spousal support that is paid pursuant to a divorce decree entered in 2018 is also grandfathered into Section 215 of the Tax Code. However, that all changes in January of 2019. Any spousal support that is ordered to be paid from a divorce decree that is entered in 2019 will not be deducted from the payor’s income. Thus, if you are currently separated from your spouse, then getting your divorce finalized in 2018 could allow you to deduct thousands of dollars from your gross income if you end up paying monthly spousal support.

By Benjamin Rathsam Esq.

Family Law Taxes Trial law