Alimony taxable now

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  #1  
Old 10-24-2021, 06:22 AM
Get real Get real is offline
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Default Alimony taxable now

the person who pays has to pay the tax now too....

Does anyone know of any effort to change this back?
  #2  
Old 10-24-2021, 06:45 AM
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stand corrected.
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Last edited by dewilson58; 10-24-2021 at 03:13 PM.
  #3  
Old 10-24-2021, 06:52 AM
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Originally Posted by dewilson58 View Post
Always Federally Taxed.
Not true. The Tax Cuts and Jobs Act (TCJA), that went into effect in December 2017, changed the rules. Before that law, the payee of alimony could claim a tax deduction, and the receiver had the claim the alimony as income. The new law takes away the deduction from the payer and allows the receiver to receive the payments tax free.
  #4  
Old 10-24-2021, 07:01 AM
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Originally Posted by retiredguy123 View Post
Not true. The Tax Cuts and Jobs Act (TCJA), that went into effect in December 2017, changed the rules. Before that law, the payee of alimony could claim a tax deduction, and the receiver had the claim the alimony as income. The new law takes away the deduction from the payer and allows the receiver to receive the payments tax free.
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  #5  
Old 10-24-2021, 07:04 AM
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Although I'm not affected, the assertion made me go look it up. Here's what I found.


It's Tax Season: Will My Alimony Be Tax Deductible in 2021?
  #6  
Old 10-24-2021, 08:26 AM
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Originally Posted by Get real View Post
the person who pays has to pay the tax now too....

Does anyone know of any effort to change this back?
The old law where the payer was able to deduct the alimony from their income tax and the payee reported the received alimony as income had the effect of lowering the taxes paid on the money. It is not true that the payer pays taxes on the alimony, they pay taxes on the income they received that is used to support their ex-spouse.

Consider Mr and Mrs Jones who when married had an income of 100,000 dollars all earned by Mr Jones, and paid the usual income taxes. Those last 15,000 earned were taxed at a higher rate than the first 15,000 earned, our progressive income tax system. While married of course Mr Jones's income was supporting Mrs Jones. He couldn't file separate returns for himself and his wife and assign 15,000 of his earned income to her return to be taxed at a lower rate.

Mr and Mrs Jones divorce. Mr Jones still makes his 100,000 dollars but is ordered to pay 15,000 a year to his ex-wife. Under the old system he would report 100,000 but deduct 15K making his taxable income 85K, and Mrs Jones would report her 15K received as income. But that 15K was in the lowest bracket and barely taxed. Mr Jones's income is still supporting Mrs Jones but now a chunk of it is being taxed at a lower rate.

If Mr and Mrs Jones had children and Mrs Jones is the custodial parent after the divorce she is also receiving child support. This is more money Mr Jones is ordered to give his ex-wife to provide for the children. Child support has never AFAIK been deductible by Mr Jones. His income is taking care of his children as it was before the divorce.

The 2017 law made alimony work as child support had always worked and this change slightly increased the amount of federal income taxes collected which was used to offset the tax reductions given businesses and individuals in the law.
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  #7  
Old 10-24-2021, 08:49 AM
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It may be semantics, but, Mr. Jones is now paying tax on $100,000 instead of $85,000. So, I am sure that he feels like he is paying tax on the alimony payments.

One of the inequities about alimony is that Ms. Jones can move in with a guy who makes $500,000, and still receive the alimony, as long as she doesn't get married.
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Old 10-24-2021, 10:52 AM
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Quote:
Originally Posted by retiredguy123 View Post
It may be semantics, but, Mr. Jones is now paying tax on $100,000 instead of $85,000. So, I am sure that he feels like he is paying tax on the alimony payments.

One of the inequities about alimony is that Ms. Jones can move in with a guy who makes $500,000, and still receive the alimony, as long as she doesn't get married.
Yes, but it is HIS money, he may or may not share it. And if he gets tired of her and out she goes, then what happens? I, personally, never encourage anyone to depend exclusively on the goodwill of someone else.
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Old 10-24-2021, 12:48 PM
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The practical effect of this is to reduce the amount of alimony awarded to spouses.

When judges look at the person paying the alimony that person can't afford to pay as much since alimony is no longer tax deductable.
  #10  
Old 10-24-2021, 02:56 PM
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Originally Posted by Velvet View Post
Yes, but it is HIS money, he may or may not share it. And if he gets tired of her and out she goes, then what happens? I, personally, never encourage anyone to depend exclusively on the goodwill of someone else.
Ms. Jones is a golddigger. She won't let him throw her out.
  #11  
Old 10-24-2021, 04:47 PM
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Originally Posted by blueash View Post
The old law where the payer was able to deduct the alimony from their income tax and the payee reported the received alimony as income had the effect of lowering the taxes paid on the money. It is not true that the payer pays taxes on the alimony, they pay taxes on the income they received that is used to support their ex-spouse.

Consider Mr and Mrs Jones who when married had an income of 100,000 dollars all earned by Mr Jones, and paid the usual income taxes. Those last 15,000 earned were taxed at a higher rate than the first 15,000 earned, our progressive income tax system. While married of course Mr Jones's income was supporting Mrs Jones. He couldn't file separate returns for himself and his wife and assign 15,000 of his earned income to her return to be taxed at a lower rate.

Mr and Mrs Jones divorce. Mr Jones still makes his 100,000 dollars but is ordered to pay 15,000 a year to his ex-wife. Under the old system he would report 100,000 but deduct 15K making his taxable income 85K, and Mrs Jones would report her 15K received as income. But that 15K was in the lowest bracket and barely taxed. Mr Jones's income is still supporting Mrs Jones but now a chunk of it is being taxed at a lower rate.

If Mr and Mrs Jones had children and Mrs Jones is the custodial parent after the divorce she is also receiving child support. This is more money Mr Jones is ordered to give his ex-wife to provide for the children. Child support has never AFAIK been deductible by Mr Jones. His income is taking care of his children as it was before the divorce.

The 2017 law made alimony work as child support had always worked and this change slightly increased the amount of federal income taxes collected which was used to offset the tax reductions given businesses and individuals in the law.
Thank you. The extra income, from a second job, my friend had to get to pay put him in the next tax bracket. It is just not fair since he can't benefit from any of that money, but still has to pay tax on it.
  #12  
Old 10-24-2021, 05:01 PM
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Originally Posted by Get real View Post
Thank you. The extra income, from a second job, my friend had to get to pay put him in the next tax bracket. It is just not fair since he can't benefit from any of that money, but still has to pay tax on it.
I agree, especially since he can't divert that money to an investment that could minimize his taxes on it. He must pay his maximum marginal tax rate on it and send the money to his ex-spouse. Not fair.
  #13  
Old 10-25-2021, 05:09 AM
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Quote:
Originally Posted by get real View Post
the person who pays has to pay the tax now too....

Does anyone know of any effort to change this back?
i think it's on the bbb list.
  #14  
Old 10-25-2021, 05:10 AM
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Has Beretta used to say, if you can't afford to do the time, don't do the crime. Even back in the 90s I had worked with an office staff of six woman all aged from the twenties to the 50s, just living with men and not being married as they all realized it was a pain in the ass to go through a divorce if they decide to kick the guy out, and they all worked for livings themselves. Yes I feel for women grow up in the 50s and '60s being told to stay home and not earn their own living and I understand the reasons for alimony. But I also don't understand many especially even if their wife's cheating on them not wanting to support someone that you obviously loved at one time.
  #15  
Old 10-25-2021, 05:16 AM
thevillages2013 thevillages2013 is offline
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Dang, well I’m never gonna get married again. Wait😩 I said that last time 😭
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