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New Tax Rules For Alimony Would Make Divorce More Expensive

If you've already been through a divorce, you know how taxes work for former spouses who are providing and/or collecting alimony: the payor deducts alimony from his or her income taxes while the recipient pays taxes on the money.

The new Republican tax plan making its way through Congress would change all that.

What would happen?

Under the proposed tax plan now under consideration, those paying alimony would no longer be able to deduct their payments from their income taxes. This would then inflate the payor's income, causing him or her to have to pay more in income taxes. Recipients, on the other hand, would no longer have to pay taxes on the money from their former spouse.

The new plan means that some divorcing couples - particularly those with a greater income inequity - would end up paying more in income tax under the new plan than they would on the current plan. The new plan would be simpler for the IRS, but would be more punitive for those paying alimony.

Get your divorce now?

While the fate of the new tax bill is still in question, those getting a divorce after it passes would be subject to the new, more expensive alimony scenario. You could wait and see what happens, or you could take action now. If you are thinking of getting a divorce and want to avoid paying more in taxes on alimony that you would right now, you may want to consider talking to a lawyer sooner than later.

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