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Tax bill could change post-divorce financial landscape for many

Colorado residents have likely heard discussions on the currently proposed Republican tax plan. The bill is being sold as a means of cutting taxes and improving the lives of middle-class Americans. In reality, however, there are numerous provisions laid out in the proposal that could create financial turmoil. An example is found in the proposed elimination of the alimony tax deduction, an issue that affects hundreds of thousands of Americans who have gone through a divorce.

If the bill should pass in its current form, spouses who make alimony payments would no longer receive a dollar for dollar tax deduction for those expenses. That could drastically change the tax obligations for those individuals. On the other hand, spouses who receive alimony payments would no longer be expected to pay taxes on that income.

In addition to increasing the tax burden on many Americans, critics of the proposed bill point out that the change could lead to increased contention during divorce negotiations. As spouses struggle to reach an agreement that offsets changes in alimony deductions, negotiations can become intense. That adds an additional layer of stress on what can already be a challenging time.

For those in Colorado who feel strongly about the matter, the best course of action is to reach out and contact the appropriate representative. Lawmakers are expected to consider the wishes of their constituents, and to make decisions that are in line with their needs. In regard to eliminating the alimony tax deduction, such a change could have a serious negative impact on many people who go through divorce.

Source: bloomberg.com, "The GOP Tax Plan Could Make Your Divorce More Expensive", Tom Metcalf and Christie Smythe, Nov. 8, 2017

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