Do you still want to get divorced?
As of the writing of this article (November 2017) things are about to be different, with the GOP tax plan. Buried deep inside the 429-page House tax bill, is a change in the character of Alimony and Spousal Support. Currently, the recipient of spousal support/alimony receives the money from the payor, and the money received is taxed as income to the recipient. Also, currently, the payor of spousal support/alimony pays the money to the recipient and receives an ABOVE THE LINE DEDUCTION for such payment.
When attorneys negotiate divorce settlements or dissolution settlements, this above the line deduction is the one benefit that the payor spouse receives, and this benefit assists in finding a negotiated settlement that the parties (and specifically the payor spouse) can live with. However, “times they are a changing”….
The rationale for this change is to “eliminate what is effectively a ‘divorce subsidy’ under the current law, in that a divorced couple can often achieve a better tax result for payments between them than a married couple can.” Effectively, this change in the tax law will increase the amount of tax paid, collectively, by the divorced couple. It is anticipated that this change alone, will generate over $8 billion dollars for the government over the next 10 years. However, the payor spouse (the higher income spouse) is the one hurt.
Will this encourage couples to remain married? Very doubtful. However, getting a divorce will get even more expensive for affluent people who are required to pay for alimony or spousal support. This new tax law won’t dissuade people from getting a divorce, but it just means that the payor spouse will be worse off.
The bottom line:
Get divorced before December 31, 2017 if you can, if you are the payor spouse. Under the new tax bill, if a spouse is paying spousal support, as ordered, prior to the effective date of this changed law, the support will still be treated as under the previous law.