Wealthy Americans May Have an Incentive to Get Divorced Quickly
A recent article in The New York Times indicates that under the new Republican tax law, there may be an incentive for wealthy Americans pondering divorce to rush to get it done before 2018 is over.
The primary reason for this is that the new Tax Cuts and Jobs Act will eliminate the previously existing tax breaks for alimony payments as of January 1, 2019. This means that wealthy Americans paying alimony in their divorce would actually lose more money starting in 2019 because they would not be able to benefit from the tax breaks they would have gotten earlier. Anyone whose divorce was finalized before January 1, 2019 will be grandfathered in and still receive tax breaks on their alimony payments.
This has created a unique situation for potential divorcees and their attorneys. Divorce lawyers tend to advise their clients to take their time through the process, in spite of how much they might wish to get it over with as quickly as possible, to ensure they’re able to get the best possible result out of their divorce. But with this change to alimony deductions coming, there’s suddenly a greater sense of urgency than there usually is with regard to divorces.
Under the current system, about 600,000 taxpayers claim the alimony deduction each year, according to information provided by the Internal Revenue Service. People who pay alimony tend to be wealthier. About 20 percent of taxpayers who claim the alimony deduction are in the top five percent of household income earners in the United States.
Planning your divorce in the wake of tax law changes
The Tax Cuts and Jobs Act is adding a lot of complexity to divorce, financial planning and estate planning. To better navigate your divorce with regard to the issues brought about by this new law, consult a skilled divorce attorney with Bryan L. Salamone & Associates.