New Tax Law Changes & Alimony Payments to Nonresident Aliens

Sweeping tax reform was signed into law by President Trump on December 22, 2017. If you’re in the middle of a divorce or separation agreement, and you will be the spouse receiving alimony, it may be worth your while to delay matters and ink the deal after January 1, 2019 when the new tax law regarding almiony takes effect. On the other hand, if you will be the paying spouse, you’ll likely want to wrap things up before that date. Here’s why – A payment of cash from one spouse to the other under the terms of a divorce or separation agreement, regardless of how it may be labeled in that agreement, will be characterized for US income tax purposes as “alimony” if the payment meets certain criteria.  Current law looks to the criteria listed in Internal Revenue Code Section 71(a),  the new law looks to the criteria listed in the new law itself that will become part of Internal Revenue Code Section 152(d)(5), as amended. …

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