July 17, 2018

New Republican Tax Plan Unintentionally Encourages Divorces Sooner than Later

The Republican tax bill signed into law by Donald Trump late last year will eliminate a tax break for alimony payments finalized after December 31, 2018–meaning people contemplating divorce should act fast if they want to deduct those monthly payments from their end-of-year taxes.

Agreements signed in 2018 will still be eligible for the annual alimony tax deductions, in perpetuity.

According to the New York Times, this has led financial planners and lawyers to advise their rich friends, who are thinking about untying the knot, to do it stat.

And the incentive for a wealthy couple consisting of one person earning far more than the other is clear and obvious. Rather than paying 15 to 20 years of support to an ex-spouse, if they divorce now, they can simply write it off of their income at the end of the year, then calculate their income tax from there, saving beaucoups of cash from what is a very generous tax break for wealthy individuals.

Put simply, high-earners will have to pay their ex-spouses a lot more, without being able to deduct it.

Currently, 600,000 divorced Americans deduct alimony from their taxes–20% of which come from the wealthiest top 5% in the US.

Read the full story here.

For Thailand attorneys specializing in divorce proceedings and settlements, contact the experts at Chaninat & Leeds.

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