The IRS Is Really Messing Up Splitting Up
Divorce pre-2019 was messy but divorce post-2018 is going to be hellish.
That’s due to the 2017 Tax Cuts and Jobs Act which reverses a law that was introduced 77 years ago. This law was created with the hope of freeing up more money for the divorcing couple and easing the transition from paying taxes jointly to paying separately.
With divorce more popular than ever in the U.S., this new tax law is really going to make a bigger mess for both parties in the divorce.
According to the American Psychological Associations, currently, approximately 50% of first-time marriages end in divorce and the divorce rate for subsequent marriages is even higher.
The heart of the new law is that, for divorces finalized after December 31, 2018, it makes alimony non-tax-deductible for the payer and non-taxable for the recipient. This eliminates the existing tax incentive for bigger support payments. And while it might seem like a good idea to having the support payments not taxed, the overall reduction in the amount of alimony will certainly result in less money paid to the recipient. Considering that the previous deduction saved about 50% in taxes for the top earners, it seems like women, who tend to be the primary recipients of alimony checks are going to be the ones who suffer.
It’s doubtful that this will reverse the divorce statistics, but it’s for sure going to make more people bitter and angry at Uncle Sam. And you simply can’t ever divorce him!