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Divorce Lawyers In NYC Are Against The New Legislation Aimed To Further Tax Alimony

Divorce Lawyers In NYC Are Against The New Legislation Aimed To Further Tax Alimony.

By now everyone has heard that the GOP is attempting to pass major tax reform legislation.  On Thursday, November 16, 2017, the House passed their version of the tax bill, the “Tax Cut and Jobs Act,” first introduced on November 2, 2017, and now the Senate will debate passing a version of their own. As one of the divorce lawyers in NYC, I’m opposed to this legislation.

The House bill is sweeping – cutting the corporate tax rate, changing the rates at which personal income is taxed, eliminating the estate tax, and doing away with several credits and deductions – and has one provision aimed specifically at couples contemplating or pursuing divorce.

Currently, spousal support payments (commonly referred to as alimony, or maintenance) are tax-deductible to the paying spouse, and taxed as income to the receiving spouse.  Divorce lawyers in NYC advise their clients that this arrangement takes a bit of the sting out of making support payments, which can lead to speedier, less contentious negotiations and settlements.

The GOP tax plan eliminates this arrangement, removing the tax cut to the payor and making support payments tax-free to the recipient.

The argument offered for this new plan is that it will (in certain cases) cause divorcing couples to pay more in total taxes than married couples, incentivizing the maintenance of intact families and producing additional tax revenue for the government from those who choose to divorce.   At present, it is possible for some divorcing couples to achieve a better tax result post-divorce than they would have had as a married couple – and the GOP plan eliminates this possibility. Divorce lawyers in NYC know that eliminating this tax break will also place strains on settlements and what the monied spouses will be willing to offer to their former spouses in support payments.

In states where there is no statutorily required spousal support, this change will prolong and raise the cost of litigation because it will be harder to get a monied spouse to agree to payments without the benefit of a tax deduction.  In New York, and other states where spousal support is mandatory if not waived, this will act as a penalty imposed on those getting divorced – essentially a morality tax imposed by the Federal Government. As one of the divorce lawyers in NYC, the last thing I think we need is the government getting involved further with our personal relationships.

The GOP tax plan is not yet the law of the land, having passed only the House of Representatives.    However, a version of the same plan has been approved by the Senate Finance Committee and will be sent to the full Senate for a vote soon.



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