Divorce is hard.
According to Uhhospitals.com, stress from divorce ranks right up there with a loved one’s death, relocating and losing a job. Generally, no one takes The Vow with the intention of getting divorced later; we’re looking for our happily ever after, not a messy break-up.
As if divorce wasn’t traumatic enough, it seems that the new alimony tax law, under the Tax Cuts and Jobs Act, is about to make things just a little more difficult for splitting couples starting after December 31st.
Reading the new guidelines on IRS.gov, I was surprised. And that’s putting it very mildly.
Under the old law, the payer was able to deduct the maintenance payments to their formal spouse on their tax return. Ok, that sounds about right. Likewise, the payee had to include those payments on their tax return. Sure, that’s income received. It makes sense that taxes should be paid on it. A sort of balance had been achieved.
However, 77 years after this law was introduced [CNBC.com], it seems that we had to shake things up a bit. Under the new law, everything is different. According to IRS.gov, the new law “states that the alimony…payments are not deductible by the payer spouse or includable in the income of the receiving spouse.”
So just what does that mean to the person receiving payments? A lot less money, according to CNBC.com. Because the payments are no longer tax deductible, CNBC acknowledges that “the amount that’s going to be paid to you is a whole lot less.” In addition, this is probably going to affect how much money is given for child support. The adage is true: you can’t get blood from a stone.
It’s not all bad news, though. Although divorcing couples will have less financial wiggle-room, this new legislation will “raise an additional $6.9 billion over the next decade for the government [CNBC.com].”
If you’re going through a divorce, you have a lot to think about. Besides dividing your record collection, your finances are also going to need a good going over by a reputable expert. Bourke Accounting specialists are well-versed with the new tax laws. Moreover, they can explain the inexplicable in a patient and comprehensible way. Finally, your Bourke Accounting professional is sympathetic and easier to talk to than your favorite bartender.
Written by Sue H.