Throughout the divorce process, financial issues are often a driving force. After years of building a life and family together, the Illinois couple decides that the marriage is over. In many instances, however, one of the individuals earns more than the other. In this case, alimony may become a factor in the Illinois couple’s divorce.
Under current tax laws, the individual paying alimony is able to write this amount off as a tax deduction. Likewise, the individual receiving alimony reports it as taxable income. In most cases, the individual receiving alimony falls into a lower tax bracket; therefore, the taxes paid on this amount is less than if the other individual was responsible for claiming it. This is often an important factor in determining the amount paid as alimony along with the other financial aspects related to the divorce.
However, this may all be changing. A new tax plan recently passed by the U.S. Congress may change the way alimony is treated. Under this new law, which is awaiting the president’s signature, the individual paying alimony will not be entitled to a tax deduction. The net effect is that the individuals together will have less money to work with as they negotiate property division issues.
This proposed change in how alimony is handled is not expected to affect Illinois residents whose divorces have already been finalized. However, it may be a concern for future ones. Experienced legal counsel can offer guidance on the best way to address the alimony issue as well as other property settlement concerns.
Source: weny.com, “Alimony will now be taxed under GOP bill“, Jackie Wattles, Dec. 15, 2017
