Legal Alerts

Tax Cuts and Jobs Act H.R.1; Section 1309, Repeal of the Alimony Deduction

Under current Federal law, alimony payments are taxable as income to the recipient and deductible from the gross income of the payor, unless the parties agree otherwise.

A provision of the proposed Tax Cuts and Jobs Act H.R.1 released by the House Committee on Ways and Means would change that. The Summary of Section 1309, “Repeal of deduction for alimony payments,” provides as follows:

“… alimony payments would not be deductible by the payor or includible in the income of the payee. The provision would be effective for any divorce decree or separation agreement executed after 2017 and to any modification after 2017 of any such instrument executed before such date if expressly provided for by such modification.”

Section 1309 states these considerations:

  • The provision would eliminate what is effectively a “divorce subsidy” in that a divorced couple can often achieve a better tax result that a married couple.
  • The provision recognizes that spousal support should have the same tax treatment as within the context of a married couple, as well as the provision of child support.

The estimated increase in revenue from this change in the law is $8.3 billion over the next 10 years.

This proposal fails to recognize that two households are more expensive than one, and that there were good reasons for allowing the seeming disparity between married couples and those living apart due to divorce. While the current version of Section 1309 will not go into effect until sometime “after 2017,” if enacted into law as written, it will have a profound impact on spousal support in years to come.