WASHINGTON — Unhappy married couples considering divorce will have to face new considerations when the tax law goes into effect at the end of 2018.
The alimony deduction, which has been in place for 76 years, will disappear, prompting new challenges in negotiating divorce terms.
“It eliminates the deductibility when you pay alimony, so now you’ll have to pay taxes on that money yourself,” said Alan Plevy, a family law attorney with Tysons-based SmolenPlevy.
The new law, which goes into effect Dec. 31, 2018, upends a tax deduction that was added to the tax code in 1942.
“The deductibility of alimony, previously, was an inducement to help us get something settled,” Plevy said. “It was a piece of the puzzle in bringing the parties together.”
Until now, Plevy said the spouse receiving alimony paid taxes on it but lawyers often included other inducements, including mortgage interest or property taxes.
“Frankly, it resulted in sometimes paying higher alimony, which has now become the norm, because the alimony that was being paid was deductible,” Plevy said. “I’m afraid alimony that’s going to paid is going to be less, going forward, because of the fact it’s no longer going to be deductible.”
Plevy said the government, rather than the separating couple, receives the benefits.
“They can now grab two billion dollars by taxing the money that was previously being taxed in the lower tax bracket for the recipient, by taxing the money for the payer, who’s in the higher tax bracket,” Plevy said.
The new law may make higher income earners who are contemplating divorce act more quickly.
“I would never suggest to anybody that they should run and get a divorce because their alimony might be deductible, that should just be a small consideration,” Plevy said.
“I don’t think this is going to affect people’s lifestyle, it’s just going to have some people paying a lot more taxes.”
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