Tax Proposal to Hit Divorcing Couples

President Trump’s tax plan unveiled this week will abolish tax deductions on alimony, and that could make future divorces nastier, writes MarketWatch.

“This will create a total reevaluation of divorce cases,” said Malcolm Taub, partner and co-chair of the divorce and family law practice group at Davidoff Hutcher & Citron LLP. “It’s major.”
Divorce lawyers say the higher-earning spouse will have more leverage to argue for lower alimony. “We settled a case this week in court where my wealthy client agreed to pay his dependent wife significant alimony because he could deduct it,” said Randy Kessler, an Atlanta-based lawyer. “The deduction, as it stands, is a great motivator to encourage the higher wage earner to agree to help support the spousewith less income.”

The current tax rules allow for matrimonial attorneys to craft a settlement whereby it is possible to make larger payments to the payee spouse at a lesser after-tax cost to the payor, said Lisa Zeiderman, founding partner of Miller Zeiderman and Weiderkehr in New York. “This benefits everyone. The payor receives the benefit of a reduced tax obligation and the payee receives the benefit of more income than might otherwise be forthcoming if the payee spouse wasn’t receiving the benefit of the tax deduction.” The tax plan comes at a bad time for many Americans, especially those in the higher income bracket.Baby boomers accumulated more wealth over their lives and — for the most part — missed the worst parts of the Great Recession such as buying a home at the peak of the market. And they are also getting divorced in much higher numbers. The rate of divorce doubled among adults of that age group between 1990 and 2010 to one in four people, according to a study carried out by Susan Brown and I-Fen Lin at Bowling Green State University.