Divorce Alert: Tax Bill Targets Alimony Deduction

Kiplinger via Yahoo ^ | November 7th, 2017 | Chris Chen

[Mariner]

Since details of the new tax overhaul bill were released on Nov. 2, people of all income levels and ages have been trying to figure out how they could be affected going forward. One group of folks not likely to be happy: those paying alimony.

Section 1309 of the House bill would eliminate the deductibility of alimony. Killing the alimony deduction is one of the smaller revenue targets for the House Republican tax bill, yet it is exceedingly significant to the people affected.

Under current rules, alimony payors may deduct their payments from their taxable incomes, thus lowering their income taxes. In return, recipients pay income taxes on their alimony income. Because payors are usually in higher tax brackets and recipients in lower tax brackets, families can save money on taxes by shifting the tax burden to the lower earner. The saving can help increase cash flow for divorcing couples. They can then decide how to allocate the savings: to the payor or the recipient ... or the court can do it for them.

According to the House, abolishing the alimony deduction would not be a large revenue generator. Over 10 years it raises only about $8 billion. That is because the tax increase on payors is offset by a tax decrease for recipients. For them, alimony income would no longer be taxable.

This wrinkle could have a significant impact on divorce settlements. For many payors, saving taxes on alimony payments is the one pain relief that comes with making the payments. According to John Fiske, a prominent mediator and family law attorney, "Alimony is the greatest tax deduction ever." Without the deduction, payors will find it much more expensive and more difficult to agree to pay.

[Milton Miteybad]

I don’t think this bill will pass. I’m beginning to think it has been sabotaged by those who don’t want tax reform. It really is looking like a deliberate attempt to prevent passage.

I was thinking the same thing. The party paying alimony/spousal maintenance does not have the use of the cash used to pay the amounts decreed. In truth and in fact, it's not income to the party paying it. There is really no basis for taxing the payor, because the payee is the one who actually realizes the income.

It only makes sense from an income tax standpoint if they allow a deduction to the paying party for alimony paid and charge it a taxable income to the party receiving it, which is the current setup.

This proposal is akin to that hare-brained scheme proposed by the Clinton Administration back in the 1990s to assess a tax against the putative value of a house with a paid-off mortgage. The reasoning (such as it was) went: "These folks aren't paying monthly mortgage payments or rent; therefore, the amount they're NOT spending on housing constitutes taxable income."

Yeah, that was a stupid idea, too. But it didn't prevent Democrats from proposing it. Now, apparently Congressional Republicans have become just as stupid today as the Dems were then.

[j.havenfarm]

Additional $8K in taxes for me. My wife left me and I have our remaining minor child 97% of the time. By keeping hope alive that we might reconcile I’ve been paying more on a temporary order than I would if I pushed the divorce through to conclusion. This provision fosters divorce by encouraging finalization of divorces in cases where reconciliation may still be possible, so as to avoid the tax consequences.

[vette6387]

“I can’t tell if you are really that ignorant or are that insipid.”

Neither! I just have traditional family values! I chose carefully the woman with whom I wanted to spend my life, and worked through the rough spots. You shouldn’t really use “big” words the meanings of which you don’t understand. But I am not offended by your stupidity, I just feel sorry for you.

[Ted Grant]

Good point, I think you’re absolutely right.

[Uncle Miltie]

Every time I encounter you, you are a truly awful human.

[Architect of Avalon]

OUTLAW ALIMONY.

[Mariner]

“Every time I encounter you, you are a truly awful human.”

Normally, an honorable man would substantiate such an insult.

[Ouderkirk]

I understand that.

In some cases it is warranted, but in this current environment I have a hard time with the idea that a woman cannot provide for herself with child support. If she married up, I fail to understand why an ex-husband is compelled to provide maintenance. If the court ordered child support isn’t sufficient for the children to have an adequate life, then why should maternity win the day... if women are to be equal to men.

Having been through the divorce meat grinder, the never ending increases in child support that are based on pre-tax earnings that exceeded the “formula” by as much as 55% or more at times , and with the ex-wife in possession of the “dependents” for the purposes of taxes, you get to feeling like finely ground liverwurst.

[itsahoot]

Yes, but then the males bang out a bunch of kids with a woman whom then then divorce and usually leave her alone to raise them.

Those guys rarely pay taxes either.

[itsahoot]

And they are ordered by a judge at the barrel of a gun.

Men have to pay child support whether the kids are theirs or not.

[itsahoot]

I can’t tell if you are really that ignorant or are that insipid.

I recall a story about some guy that has 20 or so kids and pays nothing because he doesn't have time to work or some such excuse. Taxpayers pick up the tab.

[Salvation]

Couples need to learn how to stay married.

[itsahoot]

What enables women to divorce are no-fault divorce laws

Another Republican gift. Ronald Reagan God love him screwed up on that one.

[Mariner]

“Couples need to learn how to stay married.”

So, let’s penalize every man who tried...but who has a wife that is determined to divorce?

Is that what you advocate?

We should penalize the man?

Penalty to the aggrieved party?

You need to help me with that logic.

[Salvation]

A book that every couple considering divorce needs to read.

[Salvation]

The children are the voiceless victims of divorce.

[Mariner]

That’s a complete non-response to the questions.

I’m looking for understanding, and you offer platitudes in response?

[usconservative]

Don't argue with it and it'll go away.

You're fighting a losing battle. The Bible specifically says not to cast pearls before swine. I suggest you stop casting them.

[usconservative]

OUTLAW ALIMONY.

POST OF THE DAY! Make the fat, lazy, no good b*tches get off their fat, lazy asses and work for a living for a damn' change.