As April 15 nears, many people have tax issues on their mind. Current federal tax law allows an ex-spouse who is paying alimony to deduct the alimony on his or her federal tax return. The ex-spouse who is receiving the alimony then claims the alimony as income on his or her federal tax return.
This Proposed Plan Would Change That
On Wednesday February 26, 2014 House Republicans released details of a tax overhaul bill that would, among other things, change the way alimony is taxed for Seattle divorcees and divorced couples around the country. The plan reportedly took three years for House Republican Dave Camp to write. Among the many reported changes detailed in the plan was a change in the way alimony would be taxed.
If this bill were to become law, the ex-spouse paying the alimony would no longer be able to deduct it on his or her taxes and the ex-spouse receiving it would no longer be required to claim it as income. The proposal, which would not apply to divorces that were finalized prior to 2014, would reportedly raise approximately $5.5 billion in federal revenue over a ten-year period.
Proponents of this aspect of the proposed tax bill argue that it would get rid of the so called divorce subsidy. They argue that the current tax system allows divorced couples tax incentives that married couples do not enjoy and that the system should be changed.
Some experts believe that this plan has very little chance of being made into law this year. However, tax issues that affect Seattle divorcees, and others, are always worth watching.