With several upcoming adjustments to tax laws in the United States, divorcees could be seeing fewer tax deductions. The relatively recent 2017 tax overhaul eliminated the tax deduction for alimony payments for couples that settle their divorce starting in 2019.
Changes To Tax Law
The changes to American taxes specifically impact the taxability of alimony payments. Previously, alimony payments were considered tax-deductible for the person making those payments and were considered taxable income for the person receiving the payments. However, this change would reverse this prior arrangement; alimony payments would no longer be tax-deductible for the person paying, and considered tax-free income for the person receiving.
What This Could Mean For Divorcees
For couples in the midst of their divorces, this change to tax laws could push some to rush their divorce in order to have proceedings completed by December 31. As the changes don’t take effect until 2019, couples who settle their divorces within the 2018 calendar year would not be affected. Therefore, couples may rush their divorces, and divorce proceedings may grow more heated as financial status begins to matter more. This can damage communication in the divorce process, greatly increasing stress due to reduced times for seeking appropriate counsel. A lack of appropriate counseling during the divorce process, both legal and psychological, can cause otherwise healthy divorces to become toxic quickly.
Additionally, for divorces involving children, the matter of payments and financial support could complicate matters further. Divorce with children is not uncommon, with 1.5 million children having divorced parents in the United States today. With financial matters in flux, it remains to be seen what the impact on the children of divorce will be.
Divorce in America is fairly common, with between 40 and 50% of all American marriages ending in divorce today. American couples seeking divorce will now have to further consider the financial impact of their divorce on their day-to-day lives, as the changes to taxes surrounding alimony will greatly impact divorce proceedings everywhere.