How the New Tax Bill Affects Alimony

The Republican tax bill, which was signed into law in December 2017, will affect alimony payments for people in North Carolina and throughout the country who get divorced in 2019 or later. Under the old tax laws, the person who pays alimony does not pay tax on the amount; however, the ex who receives alimony does. The new law says alimony will not be tax-deductible for the payee, and the recipient will no longer have to pay taxes on it.

Some experts have expressed concern that the law will lead to lower overall alimony payments. Under the old arrangement, tax savings were split between the couple. The higher-earning spouse paying the alimony got a tax break that made the payments easier on the budget while the lower-earning spouse paid tax on the alimony at a lower rate. That deduction saves some people who pay thousands in alimony each year.

It is unclear how many people receive alimony. The Census Bureau says it is 234,000. The IRS says that 178,000 people said they received spousal support while 361,000 reported paying it. The House Ways and Means committee said the revision would prevent people from getting a divorce in order to get a better tax break.

The tax situation will remain the same for couples who divorce in 2018. If one spouse earns a lot more than the other, that spouse might be required to pay alimony on a temporary or permanent basis. In some cases, the alimony might be payable while the ex-spouse is training for a new, higher-paying job. Alimony is based on various factors including income and how long the marriage lasted. In North Carolina, spousal misconduct could also be an issue in whether and how much alimony is awarded. People may want to discuss the likelihood of alimony payments with an attorney.

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