The changing of tax rules in the republicans proposed reform bill might be the cause of new problems for couples aiming to get divorced if it becomes part of the law. If passed, the bill would see an end to the tax reduction and cause alimony to be tax-free for the receiving party for every divorce decree that was excised after December 31st. The tax reform bill, however, does not have an affect on alimony rules.
How Alimony and Divorce Are Governed by Law
Under current law, former spouses who have to pay alimony are able to deduct this fee from their federal income tax. Spouses that receive money currently claim the money as taxable income.
So what does this mean for couple going through divorce and working to come to an amicable solution? Essentially, the spouse receiving the payment will not receive assistance from the government. In most cases this is the wife and their children
Tax Brackets for Divorcing Couples
As it stands now, the spouse that pays alimony is in a more advantageous place financially. They are usually in a higher tax code bracket than the other spouse.
The difference between these brackets is a sensible way to allocate the issuing of payments. Because of this, the spouse that is receiving payments is getting more in actual monetary value than the one paying it. This works by having the spouse receiving payment being taxed less for the contribution they receive.
The Changes Being Made to Divorce Taxation
The reason why the house bill is to be changed in this way is due to a provision that essentially gets rid of a perceived ‘divorce subsidy.’ This is because divorced couples are currently getting better tax results than married couples are.
This difference in tax rates has been used for a long time as way to get the most advantageous alleviation on payments. Its effectiveness can be seen in the way it is used as a bargaining chip during divorce settlements. Judges are also aware of this, taking into account the tax aspects of these arrangements into the decisions that make up alimony
How New Tax Laws Affect Divorce
So how will this affect couples who are going to divorce? Basically, alimony becoming no longer deductible means that an ex-spouse’s ability to pay could very well be hindered.
Anyone that goes through the process of divorce is aware that it creates a lot of trauma for those involved, and especially for their children. It is a fact that two families pulled apart cannot live without expense.
The current tax stricture aids families that are separated with these difficulties. Adjustments that are made to lifestyle according to the reduction of income cannot be made overnight. The proposed bill would make things extremely hard for those trying to make ends meet that have just gone through a divorce. Anyone wondering ‘is child support taxable’ or ‘is alimony taxable’ surely has found their answer with this new bill.
Haven’t Been Through Your Divorce Yet?
If you are in the process of going through a divorce, or are anticipating you and your partner divorcing, these changes to legislation are particularly important to take note of.
Getting the heads up on this issue is actually quite advantageous, and something you can work out with any potential lawyer you choose to hire.
However, before you this can be discussed, it’s important to know what ways you can be represented during you divorce. Divorce lawyer can be utilised in many ways.
Some clients do not use lawyers from beginning to end, but rather for only part of the case. These lawyers are categorised as being ‘limited-scope’ representation. There is also the option to have an attorney that works with others to help secure an outcome – known as a collaborative attorney.
Charges for an Attorney
It is important to remember than whilst attorneys are indeed effective, they also come at a price. Attorneys have a tendency to charge for most forms of communication, even communications they initiate.
Activities that are to be expected – such as checking documents and preparing items/evidence for the trial are of course. Administration can also be included in these costs, such payment for other individuals that help with trial, and paralegals, who assist with documentation.
Why Should I Hire an Attorney?
An attorney can help you secure the outcome you need for your case. Issues that arise between you and your spouse need to be dealt with in the best manner possible.
With the new tax legislation coming into place, it is imperative that you receive a good outcome at the end of your case. Whether you end up paying or are to be paid, other factors and division of assets aren’t to be forgotten.
Finding the Right Attorney
Hiring an attorney can really help to streamline the process between both parties. This is especially true if both parties have attorneys fighting their corner.