# The new GOP tax plan removes the alimony deduction starting 12/31/18



## Bonkers (Nov 26, 2017)

If you're thinking about getting divorced you just might want to step it up a bit, because at the end of 2018 the Federal income tax deduction for alimony payors will no longer be in effect. The current tax deduction will be grandfathered back to all divorces officially settled prior to the ball drop on New Years Eve at the close of 2018.

From what I've been reading, the courts are expected to adjust alimony payments downward to compensate for the tax code differences but it will still complicate divorces and run up the legal fees, at least until it's more established. I could see my ex back during my divorce saying "No way am I going to settle for less alimony just because of the tax law changing!". No doubt it's going to make settlements more difficult, and no matter what there will be less money to go around because the government is no longer a "silent contributing partner".

Also because of the loss of the alimony deduction the payor may be penalized in another way- they may be moved into a higher tax bracket and pay higher taxes on whatever amount is subject to the higher tax rate. 

As ugly as the divorce process is, it's going to get a heck of a lot worse, at least until all the effects of the new tax law and how they apply to alimony payments are worked out by the courts and individual states, who will probably need to update formulas for calculating alimony to compensate for the difference.


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## moline (Sep 21, 2017)

So I can tell you, I for one am glad to be wrapping this sucker up in 2018. The tax deductible alimony while the spouse has to claim it as income is fair. I predict there will be a lot of happy attorneys in 2018 as those on the bubble of making the decision are going to punch that ticket, and I totally understand that. On the flip side the courts in each state is going to have to redo the calculations in 2019 since it won't be tax deductible. This means that for a period of 2-3 years there are going to be some lopsided and abnormal decisions which may or may not be fair to either party. If you are paying alimony or "maintenance" it should be tax deductible from the payer and reported as income by the payee. Child Support is different because I believe that is your responsibility like it or not.

Prediction... 2018... divorce filings for upper middle class to upper class skyrocket!


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## EleGirl (Dec 3, 2011)

We had another thread on this recently.

Most likely the courts will take this into consideration when they calculate alimony. Meaning that the payer will not be able to pay as much alimony as they have to pay taxes on it.

It's not retroactive.


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## bff (Jul 24, 2012)

Unbelievable that the pass-through business tax cuts that will benefit attorneys will partially be paid for by their customers in the form of no more alimony deductions. I'm grateful for so many reasons that my divorce is my rear-view mirror. I'll add one more huge reason to that list, now. 

My divorce attorney did right by me, but it certainly didn't appear as though she was suffering financially and needed any more help from the government!!


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## Bonkers (Nov 26, 2017)

bff said:


> Unbelievable that the pass-through business tax cuts that will benefit attorneys ]


This is incorrect. Pass through business cuts do NOT apply to "service businesses" which include doctors, lawyers, accountants, etc. 

Attorneys do not benefit from the new tax laws in this way although they will probably benefit from the lower tax brackets as do many of us.


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## bff (Jul 24, 2012)

Bonkers said:


> This is incorrect. Pass through business cuts do NOT apply to "service businesses" which include doctors, lawyers, accountants, etc.
> 
> Attorneys do not benefit from the new tax laws in this way although they will probably benefit from the lower tax brackets as do many of us.


That's interesting. I wasn't aware of that, but did a little research and now have a better understanding. Sounds like the pass-through deduction DOES apply to these businesses, but only up to the point that they exceed certain thresholds (normal limits for individual/married couples) then they lose the pass-through deduction altogether. Given her hourly rate, I'm sure she hits these limits easily. She's in California, so loss of the SALT deductions will screw her (like me) way more than any benefit from lower bracket rates. But, that's not the point of this thread...

Thanks for the correction. I learned something!


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## Bonkers (Nov 26, 2017)

bff said:


> That's interesting. I wasn't aware of that, but did a little research and now have a better understanding. Sounds like the pass-through deduction DOES apply to these businesses, but only up to the point that they exceed certain thresholds (normal limits for individual/married couples) then they lose the pass-through deduction altogether.


I don't think that's correct either. It's my understanding that the pass thru deduction simply does not apply if the business income exceeds the limits.


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