There’s much concern about the effects the proposed reforms to the U.S. tax code will have on issues such as health care, business, education. One more issue to consider is its effects on divorcing couples. As it stands now, the tax plan would impose a new penalty on divorce. It would end the tax break divorcees now receive for paying alimony and increase the total amount of tax paid by divorced couples. By eliminating this tax break, the government stands to gain an extra $8 billion plus in new revenue over the next 10 years.
No More Deductions for Alimony
The way it works now alimony is tax deductible by the spouse who’s paying it (typically the one with the higher income). Every dollar in alimony paid reduces the payer’s taxable income by the same amount. The spouse receiving the alimony pays taxes on it just like any income. With the proposed tax change there is a switch---the paying spouse would no longer get a tax break, and the receiving spouse would no longer pay taxes on the alimony. Though it may look like the receiving spouse gets the good end of the deal, it may not be the case. Divorcing couples could end up paying more taxes post tax change, because the spouse who pays alimony, usually has the higher income and now can’t deduct it. This could lead to more legal wrangling and higher litigation fees for determining the amount of alimony a spouse is paying or receiving. Also, couples might be forced to stay longer in bad marriages that they feel too financially strapped to leave.
Mediation Can Help
People never go into marriages thinking they will one day divorce. The plan is usually happily ever after. But, sometimes life makes change necessary. The perfect choice for help in maneuvering the tax reform changes and solving the issues of divorce during this time of uncertainty, is mediation. Here are just some of the ways mediation can help.
- Mediation is non-adversarial---couples can focus on what is really important to them without confrontation or defensiveness, and concentrate on the right solution for everyone involved.
- The divorce mediator acts as a neutral third party that gently guides couples through the separation process, addressing issues such as alimony, asset and debt division, child custody and support, divorce or legal separation, one issue at a time.
- If need be, a mediator can help you decide whether to wait, try to work things out or go ahead with a divorce.
- Determine alimony by realistically looking at the income levels of each spouse to determine fair payment.
**As of this date the House has approved its version of the bill and the Senate is slated for a vote after Thanksgiving.
To learn more about the mediation process, complete our request for a free online evaluation, and to receive a free 30-minute phone consultation or call 619-702-9174.