Here’s the new tax-advantaged way to pay alimony

Personal Finance


As the tax advantages of alimony payments disappear in 2019, expect the individual retirement account to feature more prominently in divorce discussions.

That’s a prediction from Ed Slott, CPA and founder of Ed Slott and Co. He hosted a discussion on IRA planning at the American Institute of CPA’s Engage conference in Las Vegas.

Today, and under the old tax law, one spouse pays alimony and collects a benefit in the form of an above-the-line deduction on his income tax return.

“It’s almost always the case that the spouse paying the alimony was in a higher tax bracket than the one receiving it,” Slott said. “The payer gets a big deduction, and the other spouse picks it up as income in a lower tax bracket.”

The calculus of divorce has changed under the Tax Cuts and Jobs Act.

Alimony will not be available as a deduction for couples who finalize their divorce and separation after Dec. 31, 2018. Existing divorces and separations aren’t affected by this.

IRAs can provide divorcing couples an alimony planning opportunity under the new law, provided the conditions are just right, according to Slott.



Source link

Products You May Like

Articles You May Like

How to pick drug plan during open enrollment
I’m calling out the Fed as lazy and irresponsible
Brexit talks: Watch four experts explain what Brexit means for markets and companies
Automakers turn rivals into frenemies to share cost of new technology
Domino’s reports third quarter earnings 2018

Leave a Reply

Your email address will not be published. Required fields are marked *