La'Rae H. Hendrix P.A.

New tax laws may change family law negotiations dramatically

Change sometimes has a delayed reaction during which people react against new rules or ways of doing things. For many years, the normal standards in tax negotiations between divorcing couples in Florida and nationwide have included the basic premise that alimony is deductible to the payer and is income to the recipient. This has been the policy for so long that it may take some time for attorneys and clients to adjust their thinking about family law divorce negotiations.

The new rule is that alimony payments will not be deductible and will not be income to the recipient. It does not, however, go into effect until Jan. 1, 2019. For divorces executed and finalized on or before Dec. 31, 2018, they will remain subject to the current tax rules relating to alimony. Some experts predict that may cause a stampede of divorces in 2018 for couples who want to get divorced under the existing tax laws. There is one other point to keep in mind: those couples who are already divorced or who get divorced in 2018 may choose to go under the tax regulations that begin in 2019 if they both agree and sign to that effect.

They can only do that after Jan. 1, 2019 by modifying their earlier settlement agreement to reflect their mutual choice to apply the new set of rules. The current rule has encouraged the wealthier spouse to want to pay alimony to obtain the valuable deduction. It has even tended to provide larger alimony payments so that the less wealthy spouse, who is in a lower tax bracket, will be able to afford the tax bite without sacrificing his or her standard of living.

The question arises whether the rules starting in 2019 will make it more difficult to obtain an agreed-upon divorce. The American Association of Matrimonial Attorneys predicts that family law divorce negotiations will be more contentious and difficult beginning in 2019 because of the elimination of the tax enticement to the wealthier spouse. Depending on certain demographic factors, Florida may be a state where the divorce rate rises dramatically in 2018 for the sake of couples who want to go under the current rules.

Source:, "Under the New Tax Law, Is My Alimony Tax-Free?", Kevin McCormally, Feb. 7, 2018

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