Archive for the ‘Wealthy’ Category

Service of Deadlines: Divorce American Style

Thursday, July 19th, 2018

Photo: thepitcher.org

Most people must meet deadlines at work and/or at home. There are plenty associated with product introductions that, in turn, trigger marketing and media rollouts and, of course, news deadlines. Some whisk out restaurant and school meals at lunch in record time. Others note coupon redemption days; plan and attend weddings; catch trains or planes and return library books for starters.

Here’s a deadline from left field: For tax reasons you’d better hurry up and finalize your divorce according to Jim Tankersley in his New York Times article, “Wedded Bliss Lost Its Ring? Rich Should End It in ’18.” You have 5½ months before the Republican tax law kicks in.

Photo: illinoislegalaid.org

If you split after December 31, you will no longer be able to take the full amount of alimony off your Federal income taxes. This is a very big deal especially for the wealthy and think–the benefit could last for decades. In fact, from 2019 on, alimony-payers won’t be taking off a cent.

By removing the tax break Federal revenues should benefit by $7 billion over ten years.

IRS records show that 600,000 get that deduction each year, reported Tankersley. He wrote that “about 20 percent of taxpayers who currently claim the deductions are in the top 5 percent of household income earners.”

Photo: nstp.org

There are other repercussions in addition to the obvious one. The higher earning ex spouse, once the deductibility is gone, might agree to pay less alimony to compensate for the loss of the tax benefit. This will impact women and some children. “Child support payments are not deductible, but so-called unallocated support—payments that are meant to help a divorcing spouse and children at the same time—is deductible.”

Some experts predict that the new tax law might reduce the number of divorces that women initiate if it adversely impacts their alimony/income.

Photo: 80snostalgia.com

But take heart: Financial planners for the wealthiest “will have ways of working around the change.” Some spouses “may choose to forgo alimony payments and instead accept more lucrative real estate, larger shares in tax-deferred retirement accounts or some complex combination of the two that maximizes tax advantages.”

What about everyone else? Surprise surprise: “Middle-class and lower-income taxpayers have fewer of those assets—and less ability to recapture potentially lost benefits of the alimony deduction,” Tankersley wrote.

What deadlines do you find hardest to meet? Do you wait until the last minute? Have you benefited from the new tax law? Do you think that lawmakers take into consideration the repercussions that the changes they make have on citizens’ lives? The pundits couldn’t forecast whether there will be a flurry of divorces before year’s end. Do you think that there might be?

Photo: defymca.org

 

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