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New Tax Law Could Add Some Complexities to Divorce

Divorce attorneys across the country believe the Tax Cuts and Jobs Act, more commonly known as “tax reform,” could make divorce even more stressful for American couples.

One stipulation of the legislation is that, starting in 2019, higher-income individuals will no longer be able to deduct spousal maintenance (sometimes referred to as alimony) payments, while lower-earning individuals will not have to pay taxes on the spousal maintenance money they receive. This is a reversal of policies that have been place for more than 70 years, in which higher-earning spouses could deduct the money paid to a former partner, while the receiving spouse paid taxes on the spousal maintenance he or she received.

What effect will these changes have on divorcing couples?

These new rules will not apply to any divorces finalized before January 1, 2019. Therefore, higher-earning individuals in couples divorcing this year — especially in the second half of the year — will be more likely to push for a settlement so they can lock in their spousal maintenance tax deduction before the changes take effect. Lower-earning spouses, meanwhile, could attempt to delay a settlement until 2019 so they can benefit from a new tax break.

For divorces that occur in 2019 and beyond, attorneys believe there could be an uptick in hostility and complications. Those paying spousal maintenance will lose money without getting any kind of relief in the form of a tax break. This could lead to more prolonged courtroom battles regarding spousal maintenance.

Proponents of the changes say it prevents divorcing people from getting a tax break married people would not get, and that the previous rules were unfair to those who stay married. It remains to be seen exactly how the new laws will affect divorces nationwide, but it is certainly something to consider if you are about to get divorced this year.

To learn more about this and other issues related to divorce in Minnesota, contact a knowledgeable family law attorney with Appelhof, Pfeifer & Hart, P.A.

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