Article Date:
May 2018

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Divorce? Alimony? Tax Reform Says Get Divorced Now—Don’t Wait

Tax reform changes the alimony game.


And to make the game exciting, tax reform gives you only seven more months to make your alimony tax deductible.


Alimony payments are often substantial. If you are getting divorced and will pay alimony, your ability to claim tax deductions for your alimony payments is a big deal.


Example. Betsy is divorcing Tim, and Betsy will pay $120,000 a year in alimony. If Betsy can deduct the $120,000 in her 50 percent combined federal and state income tax bracket, her net cost is $60,000 ($120,000 x 50 percent).


To look at the alimony in another light, with no tax deduction Betsy has to earn $240,000, then pay taxes of $120,000 in her 50 percent bracket, before she can give Tim the $120,000.


Regardless of how you look at the cost of alimony, the loss of the alimony tax deduction is huge. Here are the winners and losers under the new law. ... Log in to view full article.

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