Divorce with a Massive Disadvantage? How New Divorce Tax Rules Can Cost You a Fortune!
Divorce is no easy settlement.
Plus things could pan out worse for divorced couples as a result of a deadline that requires couples to come an agreement before the year ends.
December 31st is the stipulated date where divorcing couples are required to have all the facets of their divorce settled prior to the tax rules touching on alimony come into effect. This is due to the Tax Cuts and Jobs Act that went through the previous year.
With the current rules in place, any payments made through alimony are tax-deductible for the one paying. Moreover, taxable income is placed for those who are being paid.
Once the New Year arrives, these rules will be scrapped off.
New Changes in Alimony Procedures
Indeed, the new changes will have brought an end to alimony procedures that have been the law for the past 70 years.
Additionally, the new changes are poised to raise for the IRS over $6.9 billion in the next decade.
That being said, divorce professionals are definitely feeling the harsh effects as many couples rush to have their agreements written before the time elapses.
Moreover, the president of the American Academy of Matrimonial Lawyers, Mr. Peter M. Walzer, stated that one has got to sign an agreement before the year erupts if one would like their permanent support to be includable as well as tax-deductible.
So one the New Year comes, the playing field will have changed for couples looking to finalize their divorce.
Indeed, financial professionals will be concerned that any new deals made while in the new tax law will place the individuals that are receiving the alimony at a disadvantage.
Which means that women, who are usually at a financial disadvantage during a divorce, might have less money to acquire in the process of a post-split.
A Lot of Stakes on the Line
Moreover, research has found that women usually have it worse off financially after undergoing a divorce.
As a matter of fact, their income reduces by over a fifth, whole men that have kids normally see their earnings increase by up to one third, as per research carried out by Professor Stephen Jenkins who is based at the London School of Economics.
Additionally, the stakes for women might be much higher with the new changes poised to take effect thanks to the new alimony tax rules.
According to the CEO of Francis Financial, Stacy Francis, she has received multiple emails and calls from women that are happy with the new changes. After all, it is poised that women that have undergone a divorce will be receiving $3000 a month in terms of alimony which will no longer be subjected to tax.
Moreover, Francis continued to say that despite the fact that the dollar amount that one receives in terms of alimony might not be subjected to tax with the new rules, the amount that one will be receiving might be much less.
It is stipulated that there might be fewer dollars awarded for child support as well as alimony. While a majority of women are serving as breadwinners of their household, and further making a contribution for spousal support, most of the alimony receipts received are those for women.
As a matter of fact, data provided by the 2010 consensus shows that of the 400,000 alimony receipts that were issued, only 3 percent of them were directed to men. Nevertheless, when the new tax rule comes into effect, it is poised that women will suffer the most.
This is according to the latest tool by Professor Laurence Kotilikoff, from Boston University economics, with the use of the Analyze My Divorce Settlement.
One major question that is lingering on people’s minds is how the postnuptial and prenuptial agreements were completed prior to the new tax law comes into effect.
According to Francis, he deems this as the reality portion of the tax reforms issued by Trump. Moreover, Walzer has stated that his practice is currently handling some premarital agreement that stipulated spousal support would be placed at $5000 per month.
That being said, now that the couple is handling the divorce proceedings, it is still a big question on how the court will handle the given deal. On the other hand, the court could make the decision that a $5000 could be the cap, or it could be reduced.
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