Changes to the tax code may be coming which may affect the way in which alimony is treated for tax purposes.
Currently, a party paying alimony is permitted to deduct from his or her taxable income, dollar for dollar, the sums being paid to the recipient, so long as the payments meet seven, inclusive critical requirements defined in the tax code. The recipient of the alimony must claim the funds as his or her taxable income. In Pennsylvania, the recipient is not required to claim alimony as income for tax purposes; however, that is not the case in other jurisdictions.
The current tax code overhaul being debated in the House of Representatives will eliminate these provisions for all divorce agreements, orders, and modified orders entered into effective January 1, 2018. We intend to keep our eyes on this issue as the bills work their ways through the House and Senate.
Stay tuned, as this could be a game changer.