How Will New Tax Reform Affect Divorce in the Coming Year?

By Alan Olsen
How Will New Tax Reform Affect Divorce in the Coming Year?

No one plans on getting divorced when they decide to tie the knot. Love will conquer all, right? Unfortunately, that's not how things work and about half of all marriages still end in divorce. Divorce is almost never pleasant and any couple that decides to split must settle several issues, including alimony, or spousal support.

So what does that have to do with taxes? Under the old tax law the person paying the alimony was able to deduct that money from his or her income. At the same time, the spouse receiving the money as alimony had to pay a 15 percent tax on those funds. Not anymore.

Under the new law it will be exactly the opposite. In other words, the spouse who has to pay alimony will no longer be able to deduct it from his or her income and the spouse who receives the payment will not have to pay taxes on it.

This will result in a net gain for the government, which it can then put towards helping to offset the price of its massive tax cut. On the plus side, the law will not go into affect until 2019. However, that could mean a lot more people will decide to divorce this year in order to save on taxes.

Not that more people are going to suddenly decide to divorce, but for anyone contemplating the possibility, this could be the factor that pushes them to go through with it. The new law could also lead to some messy situations and potentially bitter divorce proceedings as couples battle out when to end their marriages.