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Family law changes may come with new tax bill

Posted on in Family Law

Some individuals who pay alimony may be affected by changes in the new Internal Revenue Code, which appears primed for passage. Originally, the spousal support payments (alimony) were deductible from the payer's income, and the payee was responsible to claim the funds as income. The new legislation changes this, and it could affect family law decisions for divorcing couples in Illinois.

The news of the proposed change first indicated that the new rules would go into affect for any divorce or separation agreement made after Dec. 31, 2017. The new version says that the policy will affect new agreements made after Dec. 31, 2018, giving people one year to adjust and make informed divorce decisions should the legislation be enacted into law. Some experts have interpreted the legislation and have said that it seems to allow renegotiation of settlements after 2018 to include language that would let them opt out of the new tax treatment. As more leaders read and interpret the law, more details will become clear.

Critics of the alimony policy says it could reduce payments to lesser-earning spouses by making the payments more financially difficult for the payers. Payers will be less likely to offer the same amounts if they are not able to deduct them. The could possibly result in a reduction of spousal support or even child support payments, as they are sometimes calculated alongside alimony.

The changes in the Internal Revenue Code will surely have an effect on family law agreements if and when they are signed into law. Tax policies are often changing, as well as state laws about child support, spousal support and property division. A person who is facing divorce may wish to consult an attorney who can offer extensive knowledge of state and federal law and be a guide through the divorce process.

Source: Bloomberg, "Why You Don't Have to Rush to Get a Divorce Before 2018", Alexis Leondis, Dec. 18, 2017

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