The 2018 tax cut changes the way that U.S. tax law treats alimony. Payers can no longer deduct alimony payments from their taxable income. Recipients no longer have to claim it as income. The net result is that alimony payments will be taxed at the higher level of the payer instead of at the lower level of the recipient.
Women’s advocacy groups are upset about the change. They say that it’s going to make men run to the courthouse to get divorced before the law goes into effect. They say that men aren’t going to want to pay alimony if they have to pay tax on it.
People who support the new bill say that it’s all going to even out. They say that alimony awards will be a little bit smaller to account for the change in taxation. However, they say that the end result will be the same. They say that most people aren’t thinking about an alimony tax payment when they make the decision of whether or not to file for divorce.
Lawmakers say that the change is part of an overall effort to simplify the tax code. They say that most people receive a tax cut when you consider all of the rules taken together. Opponents of the law say that it isn’t true and that promises of real tax cuts are just smoke and mirrors.
Even though the tax law change impacts alimony payers and recipients worldwide, it doesn’t change how state courts determine alimony payments. Each state sets its own rules for determining alimony payments. The amounts can vary wildly by state.
For example, in Texas, alimony is for a shorter duration and typically paid in lesser amounts than in other states. Alimony is seen as a way to quickly rehabilitate the recipient in order to become financially self-sufficient. However, in other states, alimony is seen as a way to make the recipient financially whole for what they might have made if they hadn’t entered into the marriage. In states like Michigan, the court can order alimony indefinitely if the judge feels that’s what justice requires.
States like North Carolina take spousal misconduct into account. If you want to receive alimony but you cheat on your spouse, the judge typically can’t award you anything. On the other hand, if you’re the higher earner and you’re the one who cheats, a judge in North Carolina must order you to pay alimony. Each state makes up their own rules, but the federal tax implications are uniform throughout the United States.