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New tax bill will impact many divorce cases

Very few Colorado residents are unaware that a new tax bill recently passed and was signed into law. The bill contains numerous changes to the current tax code -- one of which is of great interest to couples planning a divorce. Spouses tasked with paying alimony will soon lose the chance to claim those payments as a tax deduction. 

As it stands, alimony payments are a dollar-for-dollar tax deduction for the paying spouse, while the recipient must claim the value of the payments as taxable income. That means that the paying spouse has a tax benefit, while the recipient has a higher tax bill. Critics of the change argue that, once the tax deduction is removed, paying spouses will have a significantly higher annual tax obligation. That could prompt more aggressive alimony negotiations to reduce those payments. 

Those who support the change point out that the alimony deduction can be viewed as providing divorced spouses with a tax advantage over married spouses. They feel that eliminating the tax deduction is a fair and balanced measure. It may take 5-10 years before statistics show how this change will impact divorce as a whole. 

For those in Colorado who are concerned about losing the alimony tax deduction, it's important to note that the change does not go into effect until the end of 2018. That means there is no need to rush out and file right away to preserve the deduction. However, spouses who wait until well into 2018 to get the ball rolling should consult with their divorce attorney to determine how this change might impact their bottom line. 

Source: New York Post, "Here's how the tax plan could change divorce in a big way", Dec. 22, 2017

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