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How does the new tax law affect my spousal support payments?

If you are a divorced Pennsylvania resident who pays or receives spousal support, you should know how the Tax Cuts and Jobs Act passed by Congress late last year and signed into law by President Trump on Dec. 22, 2017, affects your payments. As Market Watch explains, this new law eliminated the alimony deduction, a staple of divorce negotiations since the World War II era.

Under the old law, if you paid alimony; i.e., spousal support, to your ex-spouse, you could deduct the amount of these payments from your federal income taxes. If you received alimony, you had to declare it as income on your federal income tax return and pay taxes on it. Under the new law, both of these situations are now just the opposite.

Effective date

Before you panic about filing this year’s tax return, be aware that these changes do not go into effect until next year. The old law still applies to this year’s tax returns which, of course, cover 2017. Next year your taxes will be different. Under most circumstances you will not be able to deduct your 2018 spousal support payments, and your ex-spouse will not have to declare them as income.

The new law applies to all divorces and legal separations finalized before Dec. 31, 2018. However, if your divorce is not yet finalized, you still can deduct your spousal support payments IF you finalize your divorce by the end of the year and IF your divorce documents contain the properly worded provisions. If you are the payor, the provisions are as follows:

  • You must make the payments to or on behalf of your ex-spouse.
  • You must make them in cash or something equivalent to cash.
  • Your paperwork must designate your payments as alimony or spousal support.
  • Your paperwork must not imply in any way that they are child support.
  • Your paperwork must state that your payments cease at a specific future time or at your ex-spouse’s death, whichever occurs first.

This information is educational in nature only; it should not be interpreted as legal advice.

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