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Tax reform threatens the alimony deductible

If you’ve been keeping up with the news in Maryland, you have probably heard about the possible changes taking place in tax policies. Congress has proposed eliminating several deductions for everything from health care to student loans, but the government now aims some changes at alimony.

Currently, divorced ex-spouses who pay alimony do not have to pay extra for taxes because alimony counts as a deductible. This allows both halves of a split family to use money as fairly as the divorce dictates.

However, if Congress decides to put a tax on alimony, families could lose money in the transaction. Those who pay alimony will be left with fewer resources, which may also prevent them from providing as much support to the other person. This could create a drain that affects both parties.

This policy may be especially harsh on divorced parents who, in addition to child support, rely on alimony to raise their children. In some cases, these types of spousal support could be the main source of income for single parents.

Another consideration is that some people are willing to pay more alimony because it increases their tax return. Without this benefit, they may fight harder to pay less to their spouse. Divorce negotiations could become even more stressful if this portion of tax reform becomes law.

Despite these concerns, Republicans in the House of Representatives still believe that removing the deduction is part of a broader plan to help citizens overall. Whether this will be the reality is uncertain.

Divorce can already be an expensive process for all involved. The division of assets, intense emotions, and time consumption all take a toll on couples. While the tax policy on alimony remains tentative, divorcing spouses should discuss how alimony may play a role in their separation. Because this is a common subject that can raise arguments, we recommend seeking the aid of a divorce attorney during these negotiations.

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