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Alimony remains tax deductible, for now

Many residents of Rockford, Illinois, have heard about the recent tax reform package that will being to go in to effect even this year. One of the features of this tax reform was a profound change in the tax treatment of alimony.

Specifically, for all new alimony orders entered after December 31 of this year in connection with a divorce or legal separation, alimony will no longer be tax deductible. However, those facing the possibility of an alimony order being entered for the first time this year will still have a tax incentive to agree to paying it or, for that matter, being willing to pay more.

However, there are some legal hoops that a person will need to navigate before he or she can claim alimony as a tax deduction. For one, the person has to be genuinely separated from his or her spouse, so living in the same home or even filing a joint tax return will remove alimony payments as a possible tax deduction.

Perhaps more importantly, it is critical that a divorce or separation decree make it crystal clear what alimony payments a person is agreeing to make and in what amount. It should also clearly specify that payments are for alimony and not for some other purpose.

This is because other payments related to divorce or separation, like child support or property equalization payments are generally not tax deductible. If the IRS cannot tell whether a payment is alimony or not, it will assume that the payment is not alimony.

For now, alimony payments are tax deductible, but it is important for a person and his or her attorney to make sure they fulfill the necessary legal requirements for getting a tax deduction.

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The Law Office of Bradley R. Tengler, Inc. 728 North Court Street, Suite B Rockford, IL 61103 Phone: 815-981-4859 Fax: 815-997-5129 Rockford Law Office Map