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One of the tradeoffs for paying spousal support may disappear

There is no way around the fact that money is a part of every divorce whether it happens here in Louisiana or elsewhere. One of the financial issues that arises in many divorces is spousal support. Even when the paying spouse agrees that it is a necessity for the other, it may not exactly be pleasant to watch that money leave the bank account. Many who make these payments consider the right to deduct them at tax time as a consolation prize of sorts, but that benefit may go away.

Proposed tax legislation may eliminate the ability of the paying spouse to deduct alimony payments. Eliminating this deduction is being considered due to discrepancies between how much the payer claims that he or she paid during the course of the year and how much the payee claims that he or she received. Since spousal support is often needed due to one spouse making more money than the other, the payer is often in a higher tax bracket than the one receiving payments. This fact is often considered when determining an amount for support.

If the deduction is eliminated for the payer, it would more than likely automatically increase that person’s tax liability each year. This could affect how much the higher-earning spouse is willing to pay — or can pay. In turn, this could affect how much money the receiving spouse has available to live.

Spousal support is often a contentious issue in divorces already, and the elimination of the tax deduction could further complicate matters. Without this added benefit for those making payments, courts across the country could be inclined to reduce alimony awards to compensate. More than likely, family law attorneys here in Louisiana and elsewhere will be closely watching what happens with the proposed tax legislation in order to better serve their clients.

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

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