New Alimony Tax Laws

New Alimony Tax Laws

New Alimony Tax Laws

This year brought new tax laws, following President Trump’s Tax Cuts and Jobs Act of 2017. In my world, the biggest impact of these new tax laws is how it impacts divorcing couples where alimony is involved.

Read about it here.

It used to be that when a divorced spouse paid alimony, the payor could claim 100 percent of that payment as a deduction against earned income. It also meant that the recipient had to pay taxes on that money as income, but presumably at a lower tax rate than the payor.

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New Tax Law Deductions

That’s no longer the case! The new tax law removes the tax deductions and implications on both sides. So, the payor is paying taxes on those monies he or she actually earned. It used to be that tax laws in divorce shifted the tax to the lower-income earner. We are no longer able to shift the tax burden.

This lands the entire family in a situation where there is less money to go around.

New Territory

new alimony tax laws
During the last half of 2018, clients were eager to finish their divorces so they fell under prior tax laws. Now we’re in new territory, and our negotiations have to change. There was so much stress and tension surrounding the idea of the impending changes, trying to figure out how we needed to change the details of divorces going forward. The fact is, these are the facts, this is the situation we have, so we have to make the best of it.
Frankly, divorcing couples must change their expectations for the way their divorce is going to unfold. In my practice, I always tried to look at alimony in real dollars – what a client might receive after paying taxes, or how much of a deduction a client might have when paying alimony. It’s a total pot of how much money you have, and it remains so. Like I did in the past, I continue to give my clients a more realistic number, so they can see the full picture.

Negotiations remain the same as they always were. Now, we are trying to find ways to still derive a tax benefit, and thus far, we’ve found one workaround that works in some cases.

Ultimately, we must work with financial professionals who are skilled in tax law as it applies to divorce, to figure out a new solution, get creative, and find creative solutions to make things better for our clients.

alimony tax laws new
With any change, we must get used to the new way things are, and accept the change as a different way of doing things. It’s not like we have a choice, after all! Making peace with the details is one step toward healing the dissolution of a marriage and stepping wholeheartedly into the next phase of life.

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19 Kids & Counting – Lessons on Marriage, or Divorce?

19 Kids & Counting – Lessons on Marriage, or Divorce?

19 Kids & Counting – Lessons on Marriage, or Divorce?

I don’t watch the reality TV show 19 Kids & Counting, but a good friend of mine does, and the other day we were talking about it in the context of the work that I do.

In case you’re not familiar with this show, I’ll fill you in. It’s a window into the world of a religious Christian family in small-town Arkansas. The parents don’t believe in using birth control, so they have 19 children.

They don’t watch TV either, but they agree to star in – and benefit from – this wildly popular show as their version of a “ministry” to teach others by example the wisdom of living their lives according to what they believe is God’s will.

The girls dress modestly – long skirts, shoulders covered, no plunging necklines. They court rather than date, with the end-game being marriage. And the minute they get married, they start trying to have babies.

Episodes this spring focused on two of the Duggar daughters, Jessa and Jill, in courtships. One of them, Jill, got married June 21st to Derick Dillard, an Arkansas native who has been working as a missionary in Nepal for the past several years.

From my perspective as a family law attorney, knowing the divorce statistics in this country, I am interested in how the Duggars do marriage differently. I was also curious about whether this religious approach to marriage results in fewer divorces – since you don’t see any divorces on this show, which by definition is a slice of life, not the entire picture of course. Still, it can’t be all roses and happiness and true love – that’s just not real.

Marriage means different things in religious communities, and that’s what fascinates me about the Duggars. Marriage is the foundation of their lives. They marry young – Jessa and Ben, who are still courting, are 20 and 18, respectively.

In a courtship, there is a deliberate absence of physical contact – usually no kissing until marriage, let alone sex! That has to have an effect on the foundation of the marriage – they begin as friends, with an attraction, but they don’t act on it. It makes me wonder if their marriages are stronger because of the serious focus at the beginning.

Basing a marriage on shared values, faith and friendship should be a formula for success, right? And yet, it appears divorce rates are higher in religiously conservative communities than in more liberal areas.

Arkansas, the Duggars’ home, boasts the third highest divorce rate in the U.S., with 13 people per 1,000 divorcing in a year, compared with New Jersey and Massachusetts, at 6 or 7 per 1,000. I was surprised to learn, from a study at Baylor University, that despite strong pro-family values, evangelical Christians like the Duggars have higher than average divorce rates.

In Western cultures, more than 90 percent of people marry by age 50. According to the American Psychological Association, marriage is good for mental and physical health. In the United States, the APA reports that 40-50% of married couples divorce.

Pew Research Reports say that love wins out over other reasons to marry – which might be the reason for the high divorce rate. After all, basing a marriage on longer-lasting details than subjective emotions might be a smart way to go.

I wish Jill and Derick Dillard all the success in the world and do hope that the love they show on this popular TV program wins in the long-run. Really, I wish that for all marriages.

We in the family law profession don’t wish divorce on anyone. We just realize it is a reality as not every marriage is built on strengths. When that happens, it is my hope that a marriage can end with dignity and compassion, just the way it started.

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