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Tax changes could reduce alimony payments

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Michigan residents who currently receive alimony may be affected by upcoming changes in federal tax laws. Ex-spouses required to pay alimony are entitled to a tax break under current law. The Tax Cuts and Jobs Act includes a proposal to eliminate the tax break, which could reduce the amount alimony recipients receive because more money will be going toward taxes.

Current law allows the person who is paying alimony or spousal support to claim it as a deduction, while the person who is receiving it claims alimony as income and pays income taxes on it. The IRS has found significant discrepancies in the amount claimed in tax deductions and the amount paid in income taxes.

In 2015, approximately 598,888 tax payers claimed an alimony deduction on their taxes, for a total of $12.3 billion in tax deductions. In 2010, alimony payers claimed over $10 billion in tax deductions, while the income tax paid by alimony recipients was $2.3 billion less. If the act passes, alimony recipients will likely receive less because they are usually in a lower tax bracket than ex-spouses who are required to pay alimony. Thus, a larger percentage of the alimony payments will be paid toward taxes than the alimony recipient would be required to pay under current tax law.

People whose marriages are coming to an end may wish to consult an experienced divorce lawyer. Alimony is not automatically awarded in every case, and judges weigh factors such as the length of the marriage and the ability of each spouse to be self-supporting. Ex-spouses who have already been ordered to pay alimony may also benefit from speaking to an attorney if there has been a significant change in circumstances, such as the loss of a job or an unexpected medical emergency.

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