THE Tax Cuts and Jobs Act (TCJA) made changes to the tax treatment of divorces and legal separations in 2019 and beyond.
Current rules:
Under current rules, an individual who pays alimony can deduct alimony or separate maintenance payments. On the other hand, your beloved ex-spouse must have to report and pay tax on alimony received. These payments are treated as “above-the-line” deduction which gives you a deduction whether you itemize or claim the standard deduction.
New rules:
Not anymore. The Tax Cuts and Jobs Act (TCJA) does not allow you to deduct your alimony payments anymore. Your happy ex does not have to pay tax on such alimony either. IRS can’t please both sides.
New rules don’t apply to existing divorces and separations:
TCJA rules do not apply to existing divorces and separations. Old rules continue to apply to existing divorces and separations agreements, as well as divorces and separations that are executed up through 2018, but read special rule below.
How to apply new rules to existing divorces and separations:
If you want new rules to apply to your existing divorce decree or separation agreement, there’s a special rule that allows you to legally modify existing agreements. If you are civil enough to make a change, you may be able to negotiate an armistice when income levels change for either or both payer and payee. Good luck. Be civil and work it out.
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Victor Santos Sy graduated Cum Laude from UE with a BBA and from Indiana State University with an MBA. Vic worked with SyCip, Gorres, Velayo (SGV – Andersen Consulting) and Ernst & Young before establishing Sy Accountancy Corporation in Pasadena, California.
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He has 50 years of experience in defending taxpayers audited by the IRS, FTB, EDD, BOE and other governmental agencies. He is publishing a book on his expertise – “HOW TO AVOID OR SURVIVE IRS AUDITS.” Our readers may inquire about the book or email tax questions at [email protected].