There are many things to think about when one is looking to move forward with a divorce. Many of these concerns involve financial issues. Those who are expected pay or receive alimony following a divorce would usually prefer to have a good idea about how much they will be paying or receiving. However, sometimes changes to tax laws can alter the financial impact of alimony. This may be the case for couples looking to divorce in the near future.
New Tax Law Eliminates Deduction for Alimony
Apparently, under newly passed tax laws alimony can no longer be counted as a tax deduction for a person paying alimony. Also, those receiving alimony will no longer be required to pay taxes on the amount they receive from their former spouses. The new laws are scheduled to take effect in 2019, which means divorcing couples may want to take this into consideration when discussing their case with a family lawyer spartanburg sc.
Reconciling the Numbers
The reason for this change is because the Internal Revenue Service (IRS) reports that individuals reporting alimony on their tax deductions are significantly more than the number of individuals paying taxes on the alimony they have received. Therefore, this results in the IRS not being able to reconcile these statistics. Currently, a household’s total income enjoys tax relief via divorce since the earner with higher income is transferring income to the spouse with lower income.
More Acrimonious Divorces
One of the side effects of the changes to the tax code is that divorce negotiations will become even more contentious. Since the higher earning spouse does not have as much of a tax relief incentive for paying alimony, he or she will be incentivized to fight more rigorously during divorce negotiations in order to battle for a lower alimony payment. In a recent survey, two-thirds of top matrimonial lawyers in the U.S. expect divorce negotiations to be more contentious once the new law begins to be implemented.
Time Is of the Essence
At first the initial version of the proposed law called for ending the ability to deduct alimony at the beginning of 2018. This resulted in a brief rush by spouses to finalize their divorce agreements at the end of 2017. However, since the final version of the law only affects divorces that have been finalized in 2019, this has given divorcing spouses a second chance to get their affairs in order before the start of the new year. With the new tax code going into effect at the beginning of 2019 a divorcing spouse may want to consider speeding up the divorce negotiation process in order to obtain an agreement before the new law is implemented by the IRS.
On the other hand, it is not a good idea to simply rush through a divorce negotiation for the sake of tax benefits. There are various other factors that one should consider when negotiating a divorce settlement. Some of these factors include how to divide marital property as well as child custody arrangements. Navigating through all of this will require a comprehensive understanding of relevant laws and how they apply to the specific case in question.