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Sun Nov 5, 2017, 10:22 AM

GOP tax bill War on Alimony

Bit by bit weíre getting analysis of some of the more peculiar parts of the Republican tax bill. For example, whatís up with eliminating the tax deduction for alimony payments? This one is so minuscule (about $1 billion per year) that you canít even say itís because Republicans were scrounging for nickels under the cushions to pay for their corporate tax cuts. In a $5 trillion tax bill, this is more like scrounging for cigarette butts: itís just not worth it no matter how hard up you are. So whatís going on?

First off, letís explain what this is all about. Under current law, you write an alimony check and then both you and your spouse pay taxes on your respective net incomes. Under the Republican proposal, you pay taxes on your entire income and then write an alimony check from what remains. To see how this plays out, hereís an example using the new tax brackets in the Republican plan. Suppose you make $100,000 and a judge orders you to pay alimony of $40,000. Hereís the stylized arithmetic, not counting any kind of deductions or exemptions:

Current law: Your net income is $60,000 so you pay taxes of $9,150. Your spouse has income of $40,000 and pays taxes of $4,800. Total taxes paid = $13,950.
New Republican proposal: You pay taxes on $100,000 of your income and then send out the alimony check. Total taxes paid = $19,150.


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