Loss of alimony tax break may pose problems for divorcing couples

Personal Finance

Figuring out alimony has always been difficult for divorce lawyers, mediators and couples trying not to be couples.

Thanks to the new tax code, it’s even tougher.

In previous years, the pain of alimony stemmed in large part from each state having its own set of rules. These determined how much alimony payments should be and when such payments should end.

“There’s not really a cohesive rationale for alimony,” said Mary Kay Kisthardt, a professor of law at the University of Missouri-Kansas City School of Law. “In any given state, we’re not sure what we’re trying to do.”

For the last 75 years, however, one rule was clear: Alimony was deductible for the payer, and the recipient paid income tax on it.

The new code delivers a disruption to those who work in divorce — and those who go through it, experts say, by upending this constant in a highly subjective legal arena. Under the Tax Cuts and Jobs Act, in all divorces after Dec. 31, 2018, alimony will no longer be deductible for the payer, and taxes don’t need to be paid on it by the recipient.

Lawyers are scrambling to understand and react.

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