Q: How will the elimination of the alimony tax deduction impact divorcing couples?
Phoenix divorce lawyers are watching the Tax Cuts and Jobs Act which, in its current form, promises to impact spousal support awards for those getting divorced after 2017.
Spousal support, more commonly known as alimony, is generally awarded in a divorce when one partner earns considerably more than the other. Stay-at-home parents may have little to no income or skills having foregone their own career to raise the couple’s children and now face an uncertain financial future as their marriage dissolves. Alimony is the lifeline to help that spouse transition into a new post-divorce life.
The amount and duration of alimony depends on many factors including the incomes and ages of the parties, the length of the marriage, and more. Alimony can even be permanent, especially in the case of divorcing elderly couples where one spouse, historically the wife, may never have worked and may not realistically be employable now for a number of reasons.
Currently, the party who pays alimony get to deduct it on their income taxes while the recipient has to claim it as income and pay tax on it. However, IRS records show a multibillion dollar disparity between the collective amount that payees claim as an alimony deduction and the amount recipients claim as income received.
Critics fear that axing the alimony deduction–a financial blow to the payer–will end up hurting the recipients most on the theory that “alimony payers won’t be able to afford to give as much because they’ll have to give it to Uncle Sam instead”.
Reportedly, if the alimony deduction is eliminated, it only affects post-2017 divorce agreements. The new bill will certainly impact how family law attorneys approach asset distribution as well as spousal support in the future. There is no impact on child support, just spousal support.
If you are considering getting divorced or have questions regarding any family law matter, Cohen Family Law can help. Contact us today for a free consultation.
From our office in Phoenix, we’ve been helping families in transition in all aspects of family law since 1982.