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Experts Predict Explosion of Divorces in 2018
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Summary: Lawyers told Politico that there may be more divorces in 2018 because of the change in tax law next year.

Next year, the current alimony deduction will be erased, and this change in the tax code has some lawyers predicting that there will be an explosion of divorces this year.

  
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“Now’s not the time to wait,” family law attorney Mary Vidas told Politico. “If you’re going to get a divorce, get it now.”

Before next year’s change, current payers of alimony are able to get a tax break while their recipients must pay income tax on the money received. However, after December 31, 2018, divorcees will not be able to deduct their alimony payments and recipients won’t have to pay income tax on it.

According to Politico, this change caused by the Republican-backed Tax Cuts and Jobs Act could negatively affect women, who are the usual recipients of alimony. Legal experts stated that although women no longer have to pay taxes on the money, the change could prompt men to argue that without the tax break, the alimony amount is too burdensome. They then could lessen their yearly payments.

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“The deduction is a big deal to splitting couples because if someone who earns, say, $250,000 — which puts them in the 24 percent income tax bracket under the new law — agrees to pay $4,000 per month, it really costs the person about $3,000 after taking the deduction into account,” Politico wrote. “Without the break, many people will agree to pay only what would have been their after-tax amount — in this case, about $3,000.”

Experts said that if alimony payers fight to lower the payment amounts this will harm the recipients, who often already have trouble saving for retirement and who earn less than their ex-spouses. The experts also stated that the tax change could complicate divorce negotiations and cause more cases to be heard in court.



“The repeal reduces the bargaining power of vulnerable spouses, mostly women, in achieving financial stability after a divorce,” family law attorney Brian Vertz said.

Representative Kevin Brady, a Republican from Texas, said that the change in alimony tax rules was made to simplify the process. For instance, with the current rules, sometimes parties report different numbers, and this results in an audit of an already contentious relationship. According to the Treasury Department’s Inspector General for Tax Administration, there was a $2.3 billion discrepancy in 2010 because of the current alimony rule.

“This is one of the many provisions of the law that removes special rules applicable only in certain circumstances in order to help simplify the code and reduce tax rates for all Americans,” Brady said.

However, legal experts warn that this simplification could actually cause complications because women may end up receiving much less after 2019.

“[The deduction] helps settle cases. Without this, we will have husbands saying, ‘I’m not paying you that much,” Madeline Marzano-Lesnevich, head of the American Academy of Matrimonial Lawyers, said.

See the following articles for more information:

Source: Politico

Do you think more divorces will happen this year? Let us know in the comments below.



 

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