Know this: the Tax Cuts and Jobs Act (TCJA) permanently eliminated federal income tax deductions for alimony payments required by divorce agreements executed after 2018.
On the other side of the coin, recipients of such non-deductible alimony payments do not have to include the alimony in gross income.
So, under current law, alimony payments are no longer deductible for payers, and alimony payments are no longer taxable income for recipients.
This development is an expensive game-changer if you are a higher-income individual who must pay alimony under a post-2018 divorce agreement. Before the TCJA, you could reap big tax savings by deducting alimony payments, but those days are gone.
If your divorce is still in process, what can you do to compensate for the loss of alimony deductions? Good question. This article explains one strategy that you can potentially use if you and your soon-to-be-ex own a closely held corporation. ... Log in to view full article.