Tax law
New tax law affects maintenance, could trigger a surge in divorce
February 6, 2018 at 7:00 a.m. CST
Some experts are forecasting a spike in divorces this year as child support spouses try to take advantage of the deduction before it is overturned.
Under the new tax law, spouses who pay alimony will no longer be able to make a deduction, while spouses who receive alimony will no longer have to report it as income, Politico, USA Today and Morningstar report. The maintenance allowance has been included in the tax code since 1942.
The change won’t affect anyone who divorces or signs a separation agreement before 2019, according to USA Today.
Spouses negotiating alimony might try to pay less when the change goes into effect because there won’t be any tax savings, some experts told the newspaper. Brian Vertz, a family law attorney in Pittsburgh, said the change made women more likely to be hurt when negotiating divorce terms.
“The repeal reduces the bargaining power of vulnerable spouses, mostly women, in order to achieve financial stability after a divorce,” Vertz told Politico.
USA Today cites statistics from the US Census Bureau showing that 98 percent of the 243,000 people who received child support last year were women.
Some lawyers question whether the change will affect prenuptial agreements, which had required payment of a certain amount of maintenance in the event of a divorce.
The abolition of the withholding will result in higher overall government revenue because the person who deducted the alimony was likely in a higher tax bracket than the spouse who declares the alimony as income, Morningstar says. The elimination of the deduction could also push the maintenance payer into a higher tax bracket. Corrected typo in fourth paragraph on February 9th.
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