Tax law change could put rush on divorces in 2018
December 29, 2017 07:02 PM
At nearly 500 pages in length, the nation's new tax laws will undoubtedly have some surprises for Americans.
One of the first to come to light -- that cap on local and state tax deductions that resulted in people racing to pre-pay their property taxes.
Another change could have Americans rushing to get a divorce next year.
Ending a marriage is often an emotional and financial nightmare for couples. There are guidelines in New York designed to handle the financial aspects and often include the spouse who earns more money paying maintenance or alimony to the one who makes less.
"Spousal maintenance payments from one spouse to the other are typically tax deductible by the payor and includable as income of the recipient -- and that's been the case as long as I've been practicing law," pointed out Attorney Eric Tepper of Gordon, Tepper and DeCoursey.
Tepper helped create New York's current maintenance guidelines, which were constructed with the federal tax provisions in mind. However, under the new tax plan, maintenance will not be deductible for the spouse paying it and will not be taxable for the spouse receiving it.
"At first blush, that may seem like it's going to benefit the support recipient, because the support recipient will no longer have to pay tax on that spousal maintenance," pointed out Tepper.
Tepper says it's more likely both parties will suffer. Taxes play a prominent role in determining maintenance payments. So if the payer's taxes increase, maintenance payments will likely decrease.
The translation is everyone gets less and the impact won't end there.
"It's absolutely going to affect child support as well," noted Tepper.
The tax changes to spousal maintenance don't take effect until 2019. So unchanged, those changes present an incentive to unhappy couples to untie the knot next year.
"I do believe 2018 is going to be a year of tremendous amount of matrimonial litigation or attempts at least to resolve cases before January 1, 2019," acknowledged Tepper.
Updated: December 29, 2017 07:02 PM
Created: December 29, 2017 06:53 PM
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