Client Alert: Proposed Tax ReformDecember 4, 2017 by Lyons and Assoc
CLIENT ALERT !!
Proposed Tax Reform Will Eliminate The Deduction for Alimony Payments
Effective January 1, 2018, assuming the proposed tax reform becomes law, alimony payors will no longer be able to deduct alimony payments in their tax returns.
The proposed tax reform bill that has been passed by the House eliminates the current above-the-line deduction for alimony payments. (The Senate Bill does not address the elimination of the alimony payment deduction). This bill would not require the payee spouse that receives the alimony payments to include them as income on their tax returns.
As we know, the payment of alimony is set forth in our Marital Settlement Agreements (a.k.a. Property Settlement Agreements). The House tax reform bill defines a “divorce or separation instrument” as one of the following:
(i) A decree of divorce or separate maintenance or a written instrument incident to such a decree,
(ii) A written separation agreement, OR
(iii) A decree (not described in clause (i)) requiring a spouse to make payments for the support or maintenance of the other spouse.
As to the effective date of this reform, it is further stated that they shall apply to:
(1) any divorce or separation instrument executed after December 31, 2017, and
(2) any divorce or separation instrument (as so defined) executed on or before such date and modified after such date if the modification expressly provides that the amendments made by this section apply to such modification.
While the Senate bill does not address this issue, it is important not to assume the House bill will not become law. The conference committee will have to work together to come to a consensus on the differences between the bills prior to the bill becoming law.
Anyone who has questions about this new, proposed tax reform should contact their lawyer immediately, and also their trusted tax professional, as the taxability of alimony may very well vanish in a few short weeks.
At Lyons & Associates, P.C., our mission is to keep all families informed of changes in the law. If you have questions about this law, or any other issues, call us at 908-575-9777, or contact us online.