Ending a marriage is rarely a pleasant experience. With new changes coming in the form of scrapping the current alimony tax laws, negotiations could get even more ugly. In California, the change in tax incentives for alimony payments could have lasting consequences for other payments such as child support that is often calculated together during divorce negotiations.
Under current laws, spousal support or maintenance can be deducted from taxable income to lower the tax burden of the spouse paying support. The recipient, who in most cases has a much lower income and is often in a lower tax bracket, pays taxes on the money received. With the present incentive, it allows people to pay more alimony because they are reaping the coveted tax benefit.
Current divorce settlements are seeing fewer alimony requests. Some states have set guidelines on the time it can be collected, allowing payments just long enough for people to refresh careers and get back on their feet. Experts say lifetime alimony payments may soon be a thing of the past. With the final legislation going into effect at the year end, there could be a hefty price to pay for delaying divorce affairs after Dec. 31, 2018.
The emotions involved when a couple ends their marriage is staggering. It is expected that negotiations will become even more acrimonious with the new tax changes to alimony. In California, those considering divorce may benefit from speaking with an insightful attorney. A lawyer who has a keen knowledge of the new tax laws can answer questions and guide clients through the long legal road ahead.
Source: daily herald.com, “GOP tax change on alimony could make divorce negotiations nastier“, Ben Steverman, Feb. 18, 2018