If the recently proposed “Tax Cuts and Jobs Act” is voted into law, it could have a devastating effect on divorcing couples. Section 1309 of the tax bill proposes to remove the alimony deduction to the payer, the impact of which would be significant for many couples in different income brackets.
Currently, every dollar of alimony paid, reduces the payer’s taxable income that same amount. According to one estimate, removing this deduction will provide roughly $8 billion over ten years in additional taxes to the government, a small drop in the bucket of the nearly $1.4 trillion in tax cuts being proposed.
Southern California Couples
In Southern California, a lot of couples have difficulty enough covering their expenses while living under one roof, and now they have to cover two.
If losing the deduction wasn’t penalty enough, it appears the House has also proposed eliminating the mortgage-interest deduction. Another blow to divorcing couples living under two separate roofs.
While nothing is certain, and these provisions would only apply to couples divorced after 2017, the long-term implications are worth examining and should not be ignored. Not only will these changes likely effect the amount of alimony awarded, but will also need to be considered when determining child support.
If nothing else, be sure to speak to a professional about the effect this may have if you are currently in the divorce process.