Deadline for Spousal Maintenance Tax Deduction Expected to Cause Divorce Spike

 Posted on February 11, 2018 in Alimony / Maintenance

This is the last in a three-part series on the elimination of the alimony federal tax deduction and why you may want to complete your divorce before the change in the law goes into effect. We have already covered how losing the deduction will be costly for both spousal maintenance payers and recipients. When the payer no longer has the tax deduction as an incentive, the recipient may also receive less in spousal support payments. Fortunately, existing spousal maintenance agreements and those approved by the end of 2018 will be allowed to continue to use the deduction. This grace period was a relief to people who feared that the law would immediately eliminate the deduction. However, the new law is making 2018 a hectic year for divorce.

Divorce Rush

Though 11 months seems like plenty of time, spouses should not put off their divorce if they want to meet the deadline. Many divorce lawyers expect an increase in the number of divorce cases this year as divorcees try to take advantage of the alimony tax deduction. Completing a divorce can already be a long process, but an increased number of filings could result in couples waiting longer for court dates. It is also difficult to predict how long divorce settlement negotiations will take, particularly with high-conflict divorces. Divorcing couples are better off getting an early start in anticipation that delays may occur.

Collateral Damage

The looming loss of the alimony tax deduction will affect more people than those who plan to divorce this year:

• Spouses may need to revise their prenuptial agreements if the spousal maintenance amount anticipated the tax deduction;
• Those with existing maintenance agreements do not know whether revising the agreement would cause them to lose the deduction;
• Some spouses may stay in an unhealthy marriage because they fear lower maintenance payments will not allow them to support themselves; and
• States may adjust their spousal maintenance formulas to reflect the lost deduction.

There is uncertainty surrounding many of these issues that may not be resolved until the changes are enacted. 

Getting Started 

If you are planning to divorce or revise your spousal maintenance agreement, it would be wise to complete the process before the alimony tax deduction is eliminated. The changing law is expected to make maintenance agreements more difficult to negotiate and less advantageous for both sides. There is no reason to put off your divorce if you know it is inevitable. A Kane County divorce attorney at Goostree Law Group can advise you on what it will take to complete your divorce before the year-end deadline. To schedule a free consultation, call 630-584-4800.

Source:

https://www.politico.com/story/2018/02/04/tax-plan-divorce-alimony-marriage-389074