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Change in tax code will affect high net worth divorce

Change in tax code will affect high net worth divorce

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Up until the 2018 tax season, alimony payments were tax-deductible. However, the Tax Cuts and Jobs Act changed things for couples whose divorces involve alimony payments. Alimony payments for divorces finalized in 2019 or later can no longer be deducted from tax returns.

 What the change means

 Some experts have told Fox news that now there will no longer be an incentive to pay alimony, due to there being no benefit duringtax season. However, the one voices this opinion fails to consider the most relevant motivation—failure to pay alimony is a violation of a court order, which would be breaking the law. Regardless of how disadvantageous the new tax rules may be, there is still no less of an incentive to pay alimony than there was before.

 Who it will impact most

 The biggest impact of this change will be families that have a large differential in tax income between one spouse and another. The receiving spouse still needs to mark alimony payments received in his or her income, but since the giving spouse cannot mark the deduction, he or she will likely end up paying more on taxes than in the past.

 Non-alimony payments

 The IRS states that payments that are not a part of alimony will still fall into the same tax categories as always. For instance, payments for community property income, noncash property settlements and child support will still fall under the same categories. Child support is still not considered deductible nor is it considered income.