GOP Income Tax Proposal Changes

 Posted on November 17, 2017 in Family Law

Your maintenance payments to your ex-spouse will no longer be income tax deductible to you if the Senate passes the pending GOP Income Tax Proposal.

Historically, upon divorce the one spouse usually the husband pays alimony (maintenance) to an ex-spouse. Those alimony payments would be income tax deductible to the paying spouse and income taxable to the receiving spouse. That is all about to change.

Under the Republican Tax Plan the maintenance deduction would be eliminated for alimony (maintenance) payments.

Yesterday, November 16, 2017, the House of Representatives passed the Republican Tax Reform Act and it is now up to the Senate to determine whether that will become the law of the land.

Under the House Republican Tax Plan, the deduction for alimony (maintenance) payments would be eliminated. To say that there are many unhappy couples as well as divorce lawyers would be an understatement. The new law, if passed would also end taxation of alimony (maintenance) received by an ex-spouse. The result, higher taxes for men who make up the majority of those paying alimony, and much more contentious divorce negotiations. It is really important to women, because it makes those tough negotiations between Husband and Wife even worse.

The deduction of alimony has enabled many divorcing couples to adjust to the new economy. Many believe that the alimony deduction provided to families by spousal support is too valuable a resource to be legislated out of existence.

We as Illinois divorce lawyers for decades have used the deductibility for alimony (maintenance) to craft settlement agreements which are palatable to the paying spouse and vital to the support of women, mostly, particularly those who have been stay at home wives and mothers.

The proposed changes to the law take effect January 1, 2018 and applies to divorces finalized after that date. It is unclear if the new law would also affect existing Judgments for Dissolution of Marriage and Separation Agreements that are modified by Court Order after January 1, 2018. It is likely that families in financial crisis in a divorce will also be hit with a greater tax burden upon divorce and most likely lessen the amount available to the divorced spouse and his or her children.

We as divorce lawyers know that by eliminating the alimony (maintenance) deductions for Husbands will make negotiating settlements much tougher. A Husband knowing that he is going to have to pay alimony (maintenance) and is unable to deduct those payments, may not be so willing to pay so much for so long.

While the overall Republican Plan is calculated, they say, to cut ordinary peoples income taxes as well as making the system more simple, the elimination of the alimony deduction will have the opposite effect. Divorcing couples in Illinois will be hit with a higher tax burden, make the divorce system much more complicated and simply unfair to both spouses.

Sometimes in life the simplest form of law is not necessarily the best, especially where couples are struggling to support families and must go through an Illinois divorce.

It is time for your voices to be heard! Tell your Senators and Congressmen that you don’t want the elimination of the alimony (maintenance) deduction because you are in favor of protecting Illinois families.