Huge tax changes could send more divorces to court

Some divorce experts believe that the new tax changes could make it so that fewer couples settle out of court. This could make divorce more complicated and it could mean more people have to go through a full court case.

Specifically, they are concerned about the changes from the Tax Cuts and Jobs Act. It has passed, but it won’t technically be used until the new year. For anyone who gets divorced after Dec. 31, however, there are major changes to alimony payments.

In the past, the person who paid alimony was allowed to deduct those payments on his or her taxes. The person who got those payments had to treat them as income and pay the taxes on that end. That’s changing for 2019, though, as those deductions are cancelled. Recipients will get a break, as they no longer have to pay income tax on alimony.

It’s essentially shifting the tax burden. The payer will now be responsible both for making those monthly payments and paying taxes on that money.

How will this put more cases in court? Divorce experts note that alimony is a powerful tool that can be used to reach a settlement agreement. Since the benefits and ramifications are changing, will people be as likely to use it? When couples don’t agree as quickly, that’s when they may need to go to court to have the judge decide.

It is worth noting that some of this is conjecture at this point. The changes haven’t taken effect yet. However, it’s important to understand that they’re getting closer every day, and it will be wise to keep an eye on the legal impact they have when they begin.

Source: CNBC, “Alimony tax changes may scorch divorcing couples,” Annie Nova, accessed Feb. 21, 2018