In Michigan and throughout the United States, there always seems to be ongoing hot topic political debates of some sort. Lately, a major issue has to do with proposed tax reforms. Many people, especially those who are divorced or contemplating whether to file for divorce, are concerned about how the possibility of new tax laws may negatively affect those who pay alimony.
As it stands, paying alimony typically allows for a tax deduction. Consequently, receiving such payments is considered taxable income. All this may change if newly proposed tax reforms are passed by Congress and enacted into law. As recent as 2015, the IRS reported that as many as 12 million people claimed alimony deductions on their tax returns.
Strangely, only approximately 10 million tax form filers report alimony income. Those who support new tax codes say reform may help eliminate such discrepancies. Some say if deductions are no longer available to those who pay alimony, divorcing spouses will be far less likely to agree to the payments at the start.
A professor of matrimonial law in another state said she also believes the new laws would lead to judges ordering alimony payments less often, or at least ordering lower payments. One man agreed to pay $60,000 per year to his former wife really only pays $40,000 in light of existing tax codes and available deductions. Anyone in Michigan worried about possible changes in tax laws or facing current legal problems related to an existing court order may seek clarification of state and federal laws, as well as guidance, by reaching out to an experienced family law attorney for support.
Source: CNBC, "Is tax reform the final straw for alimony?", Nov. 10, 2017