While couples usually wait until the end of holiday season in January to file for divorce, allowing families spend the festive season together, new laws have pushed couples to hurry to file for divorce before the end of 2018. California residents might be aware that the Tax Cuts and Jobs Act change the way payments between ex-partners are taxed.
According to experts, there has been a four-fold increase in their workloads, and courts are staying open longer to accommodate the traffic of couples trying to finalize their divorce so they can take advantage of the previous tax rules. Under the old law, alimony was taxed in such a way that the higher earning spouse, usually the one paying alimony, can deduct alimony from their income while the one receiving alimony, typically the lesser earning spouse, pays tax on that sum. Under the new law, the tax burden will fall on the person writing the check.
There is debate over who benefits from the new tax law. While many argue that alimony recipients will benefit from it because they are no longer paying tax on it, it is not always that clear cut. Others argue that previously the payee would seek a higher monthly payment because of the tax deduction; this legal rationale would no longer be possible in 2019.
At the end of the day though, it is families that suffer. Whether or not the couple remains married, money that could be used towards children’s expenses is going to be paid towards taxes that didn’t exist previously. This is just one of the considerations a couple has when finalizing a divorce settlement. It might be prudent to consult an experienced attorney for guidance on what else to consider when going through a divorce.