Good bye alimony deductions—Good bye paying taxes on alimony! Whatever your political affiliation, please be advised the recently passed Tax Reform Bill dramatically impacts a divorce involving alimony. Under federal law alimony payments have been taxable to the recipient and deductible to the payor.
That is about to come to a crashing halt. With all the political noise generated by the Bill, it has gone somewhat unnoticed that the 75 year old deduction for alimony payments is repealed EFFECTIVE January 1, 1019. The change will not affect anyone divorced before 2019. Also effective January 1, 2019 the spouse receiving alimony will no longer have to pay taxes on it.
In essence as of January 1, 2019 alimony will treated just like child support, which already is not taxable to the recipient or tax deductible to the payor. Anything can happen over the next year but if it doesn’t, you can thank your elected Congress persons who voted in favor of it. It will take away a valuable divorce settlement tool.