Maintenance and Taxes After 2018
As a divorce attorney in New York, Mr. Darren Shapiro frequently deals with concerns around things like spousal maintenance or "alimony". However, thanks to the new tax law that recently passed, many professionals like him are predicting that there could be an uptick in divorces may throughout 2018. When a divorce takes place, the couple involved have many issues to face together, including conversations on how custody should be awarded, and how assets or debts should be split between both parties. As one of the most important elements in determining the financial security of each individual after a divorce is completed, maintenance payments (otherwise known as alimony), are often some of the first elements to be discussed. Whether there will be maintenance and if so how much and how long needs to be addressed.
Mr. Shapiro's long-standing experience as a divorce lawyer means that he has the knowledge to guide his clients through the terms that dictate exactly how much maintenance the guidelines say should be paid to either spouse. However, the points involved in deciding how a divorce should play out from a financial perspective are about to change, thanks to the changes in tax law established in December 2017.The Changes to Spousal Maintenance
According to news websites like MPNNow, the tax changes entered into law at the end of December 2017 were over 500 pages long, altering much of what we've come to understand about paying taxes. Though you will need to read through the changes yourself, or talk to your accountant, to find out more about the issues that might affect you, one of the most significant alterations from a family law perspective, comes in the guidelines surrounding maintenance payments, or spousal support. Up until now, the "alimony" payments delivered from the more-monied spouse, to the less-monied spouse were tax-deductible for the payer and classed as income for the payee. Now, that rule has been turned upside down by the United States Congress.
For many years, divorce attorneys like Mr. Shapiro have supported individuals seeking divorce with the same laws surrounding spousal maintenance. Now, spousal payments will no longer be taxable for the payee, or deductible for the individual paying the "alimony". According to outlets like PBS, while some might consider this to be a good thing for those who are reliant upon their maintenance payments, the changing law has many issues to consider. For instance, professionals in the divorce industry, like Mr. Shapiro are beginning to worry that the changing laws may make it harder for partners to negotiate around maintenance payments.What Does the New Law Mean to Divorcing Couples?
Though many more-monied spouses may decide to fight against the concept of paying spousal maintenance to their partner, in order to pay alimony was often softened by the knowledge that there were some tax benefits involved. This meant that spouses had less to pay on tax, and could dedicate more money to supporting their ex, and maintain their own quality of life. Although the recipient spouse was required to pay tax on the money received, the amount was the same expected for any kind of income.
After the law changes, Mr. Shapiro will now be supporting his clients from the perspective of the new tax law, starting on the 1st of January 2019. This new law dictates that the spouse paying alimony will not have the right to deduct the payments from their taxes. It also outlines that the spouse receiving the money will not have to pay taxes on that income. This change could mean that divorce lawyers like Mr. Shapiro must address a change in balance with their clients. After all, until now, it was possible for divorce attorneys to make alimony seem less threatening for the paying spouse, by informing them that the money spent was tax deducted. From now on, it could be that exes fight harder to avoid maintenance payments.
While it may seem, at first glance, as though the spouse receiving the maintenance money could benefit from the change, many professionals believe that all parties will suffer from the changing laws. For most, taxes can be a crucial element when figuring out maintenance payments. What's more, the differences could have an impact on child support payments too, as alimony amounts are often considered when figuring out income for child support purposes. This means that a change in maintenance payment amounts will lead to a change in guideline child support too - another thing that child custody lawyers like Mr. Shapiro will need to address with their clients.Changing the Maintenance Environment
Most people believe that divorce is a complicated enough experience, without bringing the issue of tax into the mix. The New York Post currently suggests that about 243,000 people were given alimony last year, and tax-paying citizens reported a total out payment of $9.6 billion in 2015.
It could be that the tax laws have changed because Congress feels that spousal support should be given the same legal treatment as child support, which is already not taxable for the recipient, or deductible for the individual making the payment. However, critics believe that when the laws do change, spouses will not have the ability to support their exes as much, and help them manage the financial burden of single life.
To learn more about spousal support, divorce law, and child maintenance, please contact Mr. Darren M. Shapiro, either through our available online form or through a phone call to (516) 333-6555.