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Tax reform may affect spousal support payments

More than one sector of the economy could potentially be affected by a new tax plan. A proposed tax reform bill would affect alimony deductions. Some experts say that this will lead to reduced spousal support in the future. Residents of Massachusetts may be interested to learn more about how the tax bill may affect them. 

Under current law, alimony payments are deductible by the payer and must be claimed as income by the person receiving the payment. Spousal support is typically granted when there is a wide disparity in the income of two individuals who are divorcing and who have been married more than a couple of years. This type of support is distinct from child support, which is not deductible. 

The change would eliminate the deduction for the payer, creating a situation in which the person making the payments would also have to pay tax on them. Since most individuals have a limited income, experts believe that this change will lead to ex-spouses receiving less as support payments. When more income goes out the door to taxes, less income is available to be offered in support. 

Spousal support can be an important financial aid for individuals seeking divorce in Massachusetts. It allows individuals to afford to live as they recover from the financial setback that can sometimes come with divorce. If the tax reform bill passes, it will affect divorce agreements entered into after 2017. Individuals who are facing divorce and have questions about spousal support may wish to consult with a lawyer to investigate their options for preserving their best interests. 

Source: USA Today, “Divorce penalty? Tax reform could shrink alimony for ex-spouses“, Sarah O’Brien, Nov. 4, 2017

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