Loss of alimony tax break in GOP bill may add to the financial pain of divorce

[FarCenter]

Figuring out alimony has always been difficult for divorce lawyers, mediators and couples trying not to be couples.

Thanks to the new tax code, it's even tougher.

In previous years, the pain of alimony stemmed in large part from each state having its own set of rules. These determined how much alimony payments should be and when such payments should end.

"There's not really a cohesive rationale for alimony," said Mary Kay Kisthardt, a professor of law at the University of Missouri-Kansas City School of Law. "In any given state, we're not sure what we're trying to do."

For the last 75 years, however, one rule was clear: Alimony was deductible for the payer, and the recipient paid income tax on it.

The new code delivers a disruption to those who work in divorce — and those who go through it, experts say, by upending this constant in a highly subjective legal arena. Under the Tax Cuts and Jobs Act, in all divorces after Dec. 31, 2018, alimony will no longer be deductible for the payer, and taxes don't need to be paid on it by the recipient.

Lawyers are scrambling to understand and react.

https://www.cnbc.com/2018/02/04/loss-of-alimony-tax-break-may-pose-problems-for-divorcing-couples.html

[TheBlackAdder]

1. What sucks? A single HoH w/4 kids loses tax breaks at $80K, a married SINK earning $150K gets them.

[Xipe Totec]

2. What sucks is that now taxes are paid at the higher tax bracket

Taxes are factored in when deciding the amounts of alimony. This change means there is less money left for either spouse to dispose of and consequently will result in lower alimony payments.

That sucks.

[JDC]

3. Sounds like a divorce deterrent, probably hurting women more

[Hortensis]

4. Yes! When I read the Repubs were removing the recipient's duty

to pay income tax, on surface overall seeming to benefit women more, I immediately thought "yeah, right," and went looking for the truth.

And that's that they're screwing women, who are most recipients, again. But also the working classes in general. Again.

There'll be plenty of analyses to come, but this The Hill article from BEFORE passage also gives a little history of the subject.

GOP should divorce itself from alimony scheme in tax bill

But most seasoned family law attorneys are of the position that eliminating a tax deduction for high-income earners who make alimony payments would have unintended consequences on the low-income earning ex-spouses who receive alimony.

This is because the tax deduction for alimony payors creates a large incentive for high-earning spouses to pay larger alimony payments than they would under Trump’s proposed statutory scheme.

Trump’s tax plan also lacks awareness that higher-income earning spouses who would lose the deduction will likely ascend into a higher tax bracket. This ultimately results in a higher aggregate tax liability imposed on the parties. Translation: The higher earner has less cash to pay alimony.

This disparity in alimony payments is not necessarily offset by simply characterizing it as excluded from the recipient’s taxable income. This typically results in the spouse depending on alimony with less cash in the end.

http://thehill.com/opinion/finance/360127-gop-should-divorce-itself-from-alimony-scheme-in-tax-bill

So the religious right's finger is obvious here, but also secular male advantage, plus yet another up-click to that giant sucking sound. If both parties end up with less cash, guess who today's Repubs intend that to benefit.