Paying or receiving maintenance? You need to read this.

A contentious issue in divorces after a  medium or long-term marriage is maintenance. Maintenance is the term Wisconsin law uses to describe what is known in other States as alimony. Under current federal tax law, maintenance payments are tax deductible to the person paying them. In other words, money paid out as maintenance to a former spouse does not count as income for the paying party, reducing their tax burden. The party who is receiving maintenance after a divorce does have to pay taxes on the payments they have received. 

The tax consequences of maintenance are considered in any case where maintenance is a reality. The proposed GOP tax bill would eliminate alimony payments as a deduction for those paying maintenance to their former spouse. This rule would apply as of January 1st, 2018 and to all divorces finalized after that date. The party receiving those payments would pay no taxes on payments received under the House GOP plan. 

If you have a divorce pending that involves maintenance issues I suggest you contact your attorney immediately to try to finalize your divorce before January 1st, 2018. This change could make divorces involving maintenance much harder to negotiate once/if this law goes into effect.

For more info on this proposed change click here