New Tax Reform Will Make Divorces Even Messier Due to Alimony Tax
Right when you thought divorces couldn’t get any worse in this country… Turns out, the new tax reform is going to make the divorce process even tougher. “Why?” you may wonder.
In order to answer this question, it’s important to understand that the most difficult part about a divorce is figuring out alimony. And while determining how much alimony people should be paying to their ex-spouses and when these payments should stop has never been easy, things are about to get even messier.
Our Fort Lauderdale tax lawyer Ira Zuckerman argues that no matter how confusing and complicated the old tax code was when it comes to divorces, the new tax reform, signed by President Trump late last year, is going to turn everything upside down.
What does it mean?
Before the Tax Cuts and Jobs Act, the hardest element of determining alimony in a divorce was that each state had its own set of guidelines to calculate alimony and determine the duration of alimony payments.
What would work in Florida would never work in California, and divorce lawyers knew this. But no matter how confusing state laws made the legal process of helping two people end their marriage, everyone knew that alimony was tax deductible for the payer, while the recipient of the alimony had to pay income tax on it. Plain and simple, right?
Well, with the new tax reform, this simple rule has been abolished. Under the new tax bill, in all divorces starting January 1, 2019, the payer of alimony will no longer be able to deduct it, while the recipient will no longer have to pay taxes on it.
How this will affect the divorce process
While experts debate about the possible pros and cons of the changes of alimony tax rules in the U.S., it’s undeniable that the changes will bring a disruption to the divorce process.
Our best tax lawyer in Fort Lauderdale explains that if judges and divorce lawyers in Florida, California and all across the country have been using a certain algorithm to determine the amount of alimony and its duration, the new tax bill has just thrown that algorithm out of the window.
It would take judges and lawyers years – if not decades – to establish a viable new plan to be able to calculate alimony fairly while taking into account the changes brought by the Tax Cuts and Jobs Act.
More divorces will go to court now
In fact, our tax lawyers at Zuckerman Law argue that the alimony tax changes may result in more divorces going to court. That’s because offering tax relief to alimony payers has helped reach out-of-court settlements through negotiations.
But now that divorces are going to get messier and tax relief will cease to be an attractive driving force behind settling cases outside of court, more people will be engaging in fierce, exhaustive and expensive court battles to get divorced and determine alimony.
However, there may be a way to come up with a better tax plan in your particular case whether you’re getting divorced or are happily married. The thing is: the new tax bill has brought tremendous changes to how we are used to handling our taxes.
Consult our Fort Lauderdale tax lawyer Ira Zuckerman about your tax situation and find out how the tax reform 2018 might affect YOU. Call our offices at 754-201-3536 or fill out this contact form to get a free consultation.