Feb. 13, 2018 11:54 p.m. ET
Maintenance payments are not tax deductible for divorce and separation agreements signed under the new tax law after 2018, a development that is likely to affect the size of future settlements.
At the same time, future dependents do not have to report the payments as income. This means that the tax treatment of maintenance is similar to that of child maintenance.
Deductions for alimony payments based on agreements concluded in 2018 and earlier are still possible. Divorced couples considering alimony should keep this deadline in mind.
In many cases, the change will be negative for both members of the couple, as the payer and payee tend to be in very different tax brackets, divorce specialists say.
For example, suppose that high-income spouse A agrees to provide maintenance payments of $ 100,000 per year to spouse B for 10 years. Under the current system, Spouse A could save about $ 37,000 in tax per year from the deduction, while Spouse B, who is in a lower tax bracket – could owe $ 15,000 in taxes on the $ 100,000 received.
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