GeoffT

Divorcees rushing to get divorced before year's end

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My divorce will be finalized on Dec 21st, just in time to beat the new law.   I kinda of agree the dependent ex-spouse could wind up getting more screwed.

 

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There’s a rush to nail down divorce deals by New Year's Eve.

After that, divorcees in 2019 will help fund tax cuts for corporate America that were enacted by the 2017 Trump tax reform.

On Jan. 1, alimony will no longer be tax-deductible by the spouse making those payments. At the same time, the recipient of what’s called spousal maintenance will no longer declare those payments as taxable income.

This provision will shrink the amount of money available for the split-up households because taxes will rise significantly for the spouse making the alimony payments.

The spouse receiving the payments, meanwhile, could see a windfall under the new rules because the payments will no longer be taxable on Jan. 1.

“The pressure is huge,” said matrimonial attorney Lisa Zeiderman, managing partner at Miller, Zeiderman & Wiederkehr of White Plains, on Tuesday. “Once the tax deduction is gone, there will be less money for the family unit. I’ve had emails and calls all morning from people who would like us to negotiate and set deadlines and put pressure, in some way, on their spouses, so we can get a deal done.”


How $100,000 payment would work 
The federal tax treatment of alimony dates back to the early 20th century. In 1917, the U.S. Supreme Court ruled that alimony payments were not tax deductible. But that changed in the 1940s, when IRS rules allowed spouses to deduct those payments, said Jere Doyle, senior vice president of Bank of New York Mellon Wealth Management.

The change approved by congressional Republicans was needed to stem the loss to the federal Treasury to $1.5 trillion over 10 years. Removing the alimony deduction will save $6.7 billion – a pittance compared to almost $700 billion saved by the $10,000 cap on the deductibility of state and local taxes.


The stakes are high. It’s not unusual for high-end spouses to pay from $5,000 to $15,000 a month – or $60,000 to $180,000 a year in alimony. At look at how the tax law would treat annual payment of $100,000 in alimony is instructive.

Let’s say the spouse paying the alimony earns $300,000 a year, and pays federal taxes of 35 percent on any income earned over $200,000. Under current law, he can deduct the $100,000 that he pays in alimony, which cuts his tax liability by $35,000.

His wife would now pay taxes on the $100,000 in alimony, but at a lower rate, with her taxes coming to just $17,000. It's a way that federal tax law has softened the financial blow that divorce delivers when marriages dissolve. 

The Trump tax law eliminated the tax break, so the IRS will receive $35,000 in tax from the husband – and nothing from the wife. That means Uncle Sam ends up with $18,000 more. That’s $18,000 less in joint income that the partners get to split up in the divorce negotiations.

“We try to create value in the marital estate, with the shift in taxable income from the higher-earning spouse to the lower-earning spouse, with the premise that there would be more money for everyone,” said attorney Ken Novenstern. “All of a sudden, that’s all going away.”

With the lower-earning spouse – typically the wife – no longer having to pay income tax on alimony payments, her income would increase, if the husband still paid the same amount in alimony.

But advocates for women doubt that will occur. They say the loss of deductibility will complicate divorce negotiations, and could result with women receiving less than they do now because their spouses have less to give. 

“The incentives for the monied spouse to be fair and generous have now been removed,” said Robbie Schlaff, director of Westchester County’s Office for Women.

"Women will be further impoverished," warned Carlla Horton, executive director of Hope's Door, a Westchester shelter for victims of domestic abuse.

 

Edited by TimS
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1 hour ago, GeoffT said:

“The incentives for the monied spouse to be fair and generous have now been removed,” said Robbie Schlaff, director of Westchester County’s Office for Women.

"Women will be further impoverished," warned Carlla Horton, executive director of Hope's Door, a Westchester shelter for victims of domestic abuse.

Good grief...the payments they receive won't be considered income and won't be taxable...those poor women :rolleyes:

 

The 'monied' spouse will have to pay tax on the alimony payments - the 'gold digger' spouse won't have to claim it as income - and STILL there's a woman's group out there complaining this is going to "further impoverish" these women :squid:  The woman complaining runs a shelter for victims of domestic abuse.  Have people always been this stupid or is it a relatively new thing?

 

Side note: I may need to switch to decaf :o

 

TimS

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1 hour ago, GeoffT said:

 I kinda of agree the dependent ex-spouse could wind up getting more screwed.

By not being taxed?  Do you think judges are going to award those women less money because the ex-husbands are being taxed on alimony? Explain please...I must be missing something :)

 

TimS

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9 mins ago, TimS said:

By not being taxed?  Do you think judges are going to award those women less money because the ex-husbands are being taxed on alimony? Explain please...I must be missing something :)

 

TimS

 

 

2 hours ago, GeoffT said:

My divorce will be finalized on Dec 21st, just in time to beat the new law.   I kinda of agree the dependent ex-spouse could wind up getting more screwed.

 

 

Agreed Tim . . . more screwed?  As getting permanent alimony (under pre 2014 law and if married 18+ years) was getting screwed to begin with?  NJ is a no fault state, meaning the "poor" spouse could up and leave for a young or old stud and still be entitled to equitable distribution of assets and alimony.

 

My ex is certainly not screwed collecting a hefty paycheck from me for the rest of her life.  I'm not complaining, worth every penny.  But please, I cannot be sympathetic.  Having the tax deduction is the only thing that makes it palatable from a financial standpoint.

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41 mins ago, cartopper said:

Agreed Tim . . . more screwed?  As getting permanent alimony (under pre 2014 law and if married 18+ years) was getting screwed to begin with?  NJ is a no fault state, meaning the "poor" spouse could up and leave for a young or old stud and still be entitled to equitable distribution of assets and alimony.

Exactly. The "non-monied" spouse decides to trade in the "monied" spouse for a newer model - the "monied" spouse now has to spend the rest of their lives provided the "digger" spouse with alimony for the rest of their lives? I'm not seeing how the non-monied spouse was screwed to begin with, much less being MORE screwed by the alimony they get not being subject to income tax...I may need someone to break out the crayons :)

 

TimS

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2 hours ago, TimS said:

Good grief...the payments they receive won't be considered income and won't be taxable...those poor women :rolleyes:

 

The 'monied' spouse will have to pay tax on the alimony payments - the 'gold digger' spouse won't have to claim it as income - and STILL there's a woman's group out there complaining this is going to "further impoverish" these women :squid:  The woman complaining runs a shelter for victims of domestic abuse.  Have people always been this stupid or is it a relatively new thing?

 

Side note: I may need to switch to decaf :o

 

TimS

You beat me to it.... I want to go smash my f****** head against the wall after reading that.

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20 mins ago, HopHead said:

You beat me to it.... I want to go smash my f****** head against the wall after reading that.

We both may need to switch to decaf :beers:

 

 

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20 mins ago, HopHead said:

We want equal everything...... except in divorce court.

And not taxing the alimony we get paid is going to further impoverish us :bucktooth:

 

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So glad the ex got married. Child support, at least per court order is long over. (Of course we never stop supporting them....) Ex could not manage the funds I would send her, once losing 800 in cash within a half hour... Got the court to adjust all to child support so I could at least see it going to their benefit. Eventually I just paid their bills for activities sports, etc. Just took ex out of equation. She is his problem now! And an ex employee of his not long ago told me how she would show up to jobsites to get another credit card when she had loaded the ones she already had. Now I am hearing she is on the sly with someone else..... Karma is a beotch, but if she breaks up this one, it will only serve to screw up the idea of a healthy relationship further for our 25 yo twins IMO.  

 

As far as the women crying foul,..... effem

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My last alimony payment is Aug 2019.  I can't wait. Nine long years.  The tax deduction made it bearable.  It's been worth it, but I can see more guys defaulting than ever before under the new law.  

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