Once the Tax Cuts and Jobs Act (TCJA) fully goes into effect on Jan. 1, 2019, any spouse paying alimony will no longer be able to deduct it on their taxes as they have in the past. Recipient spouses will also no longer have to claim the monies that they receive as income. A recent case brought in front of the tax court on Sept. 5 perhaps set a new precedent for what's considered as alimony.
The case Vanderhal, TC Summ. Op. 2018-41 centers around a California couple who divorced in 2011. In the divorce decree, the couple agreed to an equitable split of all assets and debts. One item listed on that list was a Sallie Mae student loan that the husband's ex-wife had taken out.
Before the case ended up being filed in tax court for a judge to decide, the husband had argued that his payment on the student loan equated to alimony. The wife argued that it didn't.
After reviewing the divorce decree in the case, the judge presiding over the matter determined that the payments that a spouse made toward their ex's student loan debt indeed counted as alimony. Given the judge's determination in the matter, the husband now will be obligated to pay less alimony going forward in exchange for having made the student loan payments.
By paying this way, others may be able to get around not being able to deduct for spousal support on their taxes in future years. Student loans remain a tax deductible expense.
Unlike other provisions of the TCJA that remain in effect only until 2025, the alimony provision is permanent. Alternatives to spousal support exist. Consult with a Kissimmee alimony attorney to find out what those are.