Representing Vancouver clients since 2003, John L. Davis PLLC can help you with cases involving family, business and real estate law, as well as ensuing litigation. For direct, straightforward legal counsel.
Getting a divorce can be a challenging process, and the new tax law may complicate it even more. When the Tax Cuts and Jobs Act (TCJA) was passed on December 22, 2017, it brought changes to alimony and maintenance payments. As of 2019, the spouse making alimony and maintenance payments can no longer take these payments as tax deductions.
As part of the divorce agreement, the higher-earning spouse usually commits to making alimony and maintenance payments to the lower-earning spouse. These payments are intended to make up for economic hardship suffered by the lower-earning spouse as a result of the divorce. The spouses, along with their attorneys, typically negotiate the amount of the alimony or maintenance during the divorce proceedings.
Under the previous tax plan, maintenance payments were deductible. So, the higher-earning spouse would enjoy a tax break on the alimony paid to the lower-earning spouse, which usually provided an incentive for the higher-earning spouse to cooperate with the divorce agreement. Also, the lower-earning spouse, who typically fell into a lower income tax bracket, paid lower tax rates on the alimony they received. As a result, both parties shared this tax benefit, which encouraged timely and relatively equitable settlement agreements.
Under the updated tax law, the payor can no longer deduct maintenance payments, so divorce proceedings may become more challenging and expensive for separating couples. Champions of the new tax law want alimony to be treated more like child support, which is not tax-deductible. However, this rule does not take effect immediately; only those who start paying alimony after January 1, 2019 will need to adhere to the updated law. Anyone completing a divorce in the rest of 2018 will still be able to write off these types of payments.
Critics of this new law worry that if couples who are divorcing in 2019 and beyond are not able to take deductions, there may be less incentive for the higher-earning spouse to provide as much support to the lower-earning spouse. Malcolm S. Taub, a New York City matrimonial lawyer, recently told the New York Post that lawmakers are “taking money from people who’ve undergone the trauma of divorce, and they’re taking money from people at one of the worst times of their life.” Taub estimates that alimony recipients after 2019 will lose 10-15% of what they would receive under the former law.
While 2019 is still about one year away, it is important to understand how this change could impact you. John L. Davis PLLC will walk you through all the aspects of divorce, including what the new law means for you. We look at divorce cases from a holistic perspective, integrating business law, real estate law, and family law in our approach. Contact our Vancouver office today at (360) 597-4740 to get started with a knowledgeable divorce attorney.
Call (360) 597-4740 now to get the quality help you and your family need.
Whether your legal issue involves a family law issue, real estate, or a business matter, we’re here to help.
site by LegalRev