North Carolina provides two possibilities of spousal support in lieu of a divorce: 1) post separation support; and 2) alimony.
Post separation support (PSS) is temporary and it is used to address the immediate needs of the dependent spouse. A dependent spouse is essentially the spouse who makes less money than the other (supporting) spouse. PSS is the amount paid between the time of separation and the time an award of permanent alimony begins and is paid (if awarded), until the order awarding or denying alimony, order for absolute divorce with no pending alimony claim, date in order for PSS, cohabitation, remarriage, or death.
On the other hand, alimony terminates at the earlier of one of the following: 1) date set by the court, 2) date of death of either party, 3) date of remarriage of the dependent spouse, or 4) date of beginning of cohabitation by dependent spouse. In North Carolina, only a dependent spouse can receive alimony. Alimony is separate from child support. Right now alimony payments are tax free for the payor and taxed like regular income for the recipient. IRS reports show about 600,000 Americans claimed an alimony deduction on their 2015 tax returns.
However, with this new tax plan, alimony payments will no longer be a tax deduction for the supporting spouse. This new tax plan takes effect in 2018. That means existing agreements generally will not be impacted by this new tax plan. However, if an existing agreement were modified after 2018, the modified agreement would be subject to the new tax plan rule.
This new tax plan could have the potential of making marriages an even more drawn out and expensive process, and could be the most financially painful for lower-income couples. There is potential for the new tax change to have a negative impact on PSS for dependent spouses to get the financial support they need because their ex-spouses will have less money without the deduction. It could also have a complicating impact on calculating child support for the same reason.