Trump Administration’s New Tax Law May Increase Divorce Rates, Experts Say

Trump Administration’s New Tax Law May Increase Divorce Rates, Experts Say

Some tax experts are projecting a rise in the divorce this year as spouses who have to pay alimony may be able to have a deduction before it is eliminated. The Trump administration’s new tax law does not allow spouses paying alimony to take a deduction. However, spouses receiving alimony will no longer have to report the funds as income. The country’s tax code has allowed alimony to be deducted since 1942. Many divorce experts are concerned the changes in the tax code will make the legal process of divorce more difficult. They also believe it will be harder to have agreements including spousal support.

 

What is Changing?

 According to a USA Today news report, these changes will apply to any divorce that is filed after December 31, 2018. Currently, the law is the opposite. Spouses who have to pay alimony can report it as an deduction. However, recipients of alimony have to report it as an income. Divorce lawyers argue the current set up helps both parties to afford living separately because it saves money overall. Supporters of the new tax code say the current law is really a divorce grant. They think this because divorcees can have better tax outcomes. The nonpartisan Joint Committee on Taxation sees that getting rid of the deduction will add nearly $7 billion in new tax revenue over the next decade.

 

Who Gets Alimony?

Government statistics vary on how many people actually get alimony each year. According to the U.S. Census Bureau, nearly 250,000 people received alimony last year. With 98% of them being female. The Internal Revenue Service, reports more than 360,000 taxpayers claiming a paying out a total of $9.6 billion in alimony in 2015. Only 178,000 reported receiving spousal support that same year. Also, child support payments are separate and apart from alimony. Some divorces involve only child support, while others involve both child support and alimony. America’s divorce rate was at its highest in the early 1980’s. It has been steadily declining since. Federal statistics show that more than 813,000 couples divorced in 2014. Notably, child support is not a tax-deductible for the payer nor is it taxable for the recipient.

 

Seek an Attorney’s Advice

If you or someone you know has questions about the changes in the tax code and how it affects your divorce, or you are presently facing divorce and have questions, contact a knowledgeable attorney today.

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