Raleigh Family Law Attorney Raises Concerns Over New Tax Bill’s Effects on Alimony Settlements
Congress passed a $1.5
trillion tax bill on December 19, 2017, cementing what is considered “the most sweeping rewrite
of the tax code” in
recent history. The bill impacts the most contentious points of taxation, such
as greater tax cuts for corporations and business owners. It also significantly
affects individual taxpayers who now face the loss or limitation of several tax
Under the bill, for
example, taxpayers can:
claim lower deductions on mortgage interest
claim casualty losses if these are incurred in a disaster declared by the
longer deduct the interest on home equity loans
longer deduct alimony payments, if they are paying them
longer list alimony as income, if they are receiving it
The last two should raise
red flags for any family law attorney and their clients.
does the lost alimony tax break mean?
If most alimony payments
are no longer tax deductible this will create an additional financial burden on
the spouse required to pay alimony. The payor would now have to balance it with
other fixed expenses like child support, and education-related expenses for
This, in turn, would
complicate calculations for exactly how much of these other fees the payor
would be responsible for, and potentially impact how other assets are divided
between the divorcing parties.
Divorce – already difficult
in itself – would prove be tougher on lower-income individuals, for whom a few
hundred dollars in tax breaks could make a big difference for day-to-day
much of a game-changer could it be?
The lost tax break could
drastically change how couples negotiate their divorce. In previous years, some
supporting spouses agreed to pay the other party’s requested amounts, expecting
they would at least receive some tax deductions. With this no longer being
possible, negotiations could become more difficult due to parties becoming
unwilling to pay or settle.
Since alimony is also a
factor in designing pre-nuptial agreements, the new bill can also influence
couples’ decisions for themselves and their families – even if they never file
The bill’s stipulations on
alimony will not take effect after December 31, 2018; parties already paying
alimony need not worry outside their current obligations.
Nonetheless, contact your
family law attorney if you want to further discuss how the new tax bill might affect
you. The team at Kurtz & Blum can help you navigate all legalities
concerning marriage, no matter what complications arise along the way.
Republican Tax Bill Passes
Senate in 51-48 Vote, NYTimes.com
How Tax Reform Could Radically
Change Divorce, Forbes.com
Alimony payers lose tax
deduction under GOP bill, CNN.com
Here are five breaks you’ll miss the most in the
tax bill, CNBC.com