The New Tax Law Does Away with Alimony, Spousal Support Deduction

With very little fanfare, the new tax law that was passed at the very end of December, 2017, and which is effective in 2018, did away with the requirement that spousal support (previously known as alimony) receivers declare spousal support as income and, on the other side of the balance sheet, did away with the deduction for spousal support payers.

The good news is that if your divorce was already finalized – or – if your divorce becomes finalized before the end of 2018 (i.e. by December 31, 2018) – you can still deduct spousal support for the duration. In other words, this particular part becomes effects divorces that are finalized after 12/31/18.

 

The language of the new tax law that addresses this is very confusing, primarily because it is, in large part, just a series of amendments that amend already existing tax law. Those amendments have the effect of removing the tax deduction for spousal support.

Then, at the very end of that section, there is this language:

“c) Effective date.—The amendments made by this section shall apply to —

(1) any divorce or separation instrument (as defined in section 71(b)(2) of the Internal Revenue Code of 1986 as in effect before the date of the enactment of this Act) executed after December 31, 2018, and

(2) any divorce or separation instrument (as so defined) executed on or before such date and modified after such date if the modification expressly provides that the amendments made by this section apply to such modification.”

Now, again, that’s the good news for those of you who already are paying spousal support under a divorce decree that was finalized prior to the writing of this article (February 12, 2018), or for anyone whose divorce will be finalized by December 31, 2018.

The bad news (other than for those whose divorces won’t be final) is that this is going to give a soon-to-be-ex incentive to drag it out so that the divorce will not be done by December 31, 2018. Basically all they have to do is make sure that the divorce is not finalized until at least 1/1/19, and they will not have to report the spousal support you pay them as income, and you will not be able to deduct it from your taxes.

Stay tuned, because we will be covering how to deal with this in an upcoming article.

In the meantime, if you’d like to talk with a father-friendly and very knowledgeable tax attorney who also prepares taxes (for all states), check out DadsRights.org approved tax attorney Mathew Blackburn at www.dmblackburn.com. You can also call him at 720-213-6204 or email him at information@dmblackburn.com. We are not affiliated with Mr. Blackburn and receive no benefit from this referral, we just know that he’s a very conscientious and excellent tax attorney/preparer.

Full Text of Section of HR 1 2017/2018 Tax Law that Removes the Deduction for Spousal Support

EC. 11051. Repeal of deduction for alimony payments.

(a) In general.—Part VII of subchapter B is amended by striking section 215 (and by striking the item relating to such section in the table of sections for such subpart).

(b) Conforming amendments.—

(1) CORRESPONDING REPEAL OF PROVISIONS PROVIDING FOR INCLUSION OF ALIMONY IN GROSS INCOME.—

(A) Subsection (a) of section 61 is amended by striking paragraph (8) and by redesignating paragraphs (9) through (15) as paragraphs (8) through (14), respectively.

(B) Part II of subchapter B of chapter 1 is amended by striking section 71 (and by striking the item relating to such section in the table of sections for such part).

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(C) Subpart F of part I of subchapter J of chapter 1 is amended by striking section 682 (and by striking the item relating to such section in the table of sections for such subpart).

(2) RELATED TO REPEAL OF SECTION 215.—

(A) Section 62(a) is amended by striking paragraph (10).

(B) Section 3402(m)(1) is amended by striking “(other than paragraph (10) thereof)”.

(C) Section 6724(d)(3) is amended by striking subparagraph (C) and by redesignating subparagraph (D) as subparagraph (C).

(3) RELATED TO REPEAL OF SECTION 71.—

(A) Section 121(d)(3) is amended—

(i) by striking “(as defined in section 71(b)(2))” in subparagraph (B), and

(ii) by adding at the end the following new subparagraph:

“(C) DIVORCE OR SEPARATION INSTRUMENT.—For purposes of this paragraph, the term ‘divorce or separation instrument’ means—

“(i) a decree of divorce or separate maintenance or a written instrument incident to such a decree,

“(ii) a written separation agreement, or

“(iii) a decree (not described in clause (i)) requiring a spouse to make payments for the support or maintenance of the other spouse.”.

(B) Section 152(d)(5) is amended to read as follows:

“(5) SPECIAL RULES FOR SUPPORT.—

“(A) IN GENERAL.—For purposes of this subsection—

“(i) payments to a spouse of alimony or separate maintenance payments shall not be treated as a payment by the payor spouse for the support of any dependent, and

“(ii) in the case of the remarriage of a parent, support of a child received from the parent’s spouse shall be treated as received from the parent.

“(B) ALIMONY OR SEPARATE MAINTENANCE PAYMENT.—For purposes of subparagraph (A), the term ‘alimony or separate maintenance payment’ means any payment in cash if—

“(i) such payment is received by (or on behalf of) a spouse under a divorce or separation instrument (as defined in section 121(d)(3)(C)),

“(ii) in the case of an individual legally separated from the individual’s spouse under a decree of divorce or of separate maintenance, the payee spouse and the payor spouse are not members of the same household at the time such payment is made, and

“(iii) there is no liability to make any such payment for any period after the death of the payee spouse and there is no liability to make any payment (in cash or property) as a substitute for such payments after the death of the payee spouse.”.

(C) Section 219(f)(1) is amended by striking the third sentence.

(D) Section 220(f)(7) is amended by striking “subparagraph (A) of section 71(b)(2)” and inserting “clause (i) of section 121(d)(3)(C)”.

(E) Section 223(f)(7) is amended by striking “subparagraph (A) of section 71(b)(2)” and inserting “clause (i) of section 121(d)(3)(C)”.

(F) Section 382(l)(3)(B)(iii) is amended by striking “section 71(b)(2)” and inserting “section 121(d)(3)(C)”.

(G) Section 408(d)(6) is amended by striking “subparagraph (A) of section 71(b)(2)” and inserting “clause (i) of section 121(d)(3)(C)”.

(4) ADDITIONAL CONFORMING AMENDMENTS.—Section 7701(a)(17) is amended—

(A) by striking “sections 682 and 2516” and inserting “section 2516”, and

(B) by striking “such sections” each place it appears and inserting “such section”.

(c) Effective date.—The amendments made by this section shall apply to—

(1) any divorce or separation instrument (as defined in section 71(b)(2) of the Internal Revenue Code of 1986 as in effect before the date of the enactment of this Act) executed after December 31, 2018, and

(2) any divorce or separation instrument (as so defined) executed on or before such date and modified after such date if the modification expressly provides that the amendments made by this section apply to such modification.

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