New Tax Law Could Encourage Speedy Divorces

Posted 7/6/2018

Financial planners and lawyers are reminding their wealthiest clients that the Tax Cuts and Jobs Act eliminates a tax break for alimony payments that are finalized after December 31st. Agreements signed before the end of the year will still qualify for the annual deduction - a distinction with large financial implications for couples where one partner earns substantially more per year than the other. Lawyers warn that the loss of the alimony deduction could disproportionately hurt women, who are the more frequent recipients of alimony payments and who face a higher risk of income decline after divorce than men. It could also reduce the welfare of some children. At present, around 600,000 taxpayers claim the deduction each year, according to the IRS. The Joint Committee on Taxation estimates elimination of the tax break will increase federal revenues by $7bn over the course of a decade.