Tax Code Changes Could Make Divorce More Emotionally and Economically Draining
PITTSBURGH — Family law attorneys expect changes in the federal tax code to make the already emotionally trying process of divorce more difficult while subjecting both spouses to added financial burdens. The Tax Cuts and Jobs Act of 2017 includes a provision that will completely flip the way alimony payments are taxed beginning in January 2019.
Attorneys at Pittsburgh-based family law firm Pollock Begg Komar Glasser & Vertz LLC are preparing their clients for this upcoming change and gearing up for a possible increase in divorces as many clients may try to finalize by Dec. 31, 2018, prior to the new alimony law taking effect.
Until now, spouses paying alimony have been permitted to deduct the entire dollar amount from their earned income, lowering their overall tax liability. Alimony recipients have been taxed on the payments they receive. Under the new law, the paying spouse will not be able to deduct alimony payments from income and the receiving spouse will not be required to pay tax on the alimony income.
“It’s a scenario that may appear to benefit alimony recipients at first glance,” said Candice L. Komar, founding partner at the firm. “But many attorneys expect the new tax plan is likely to cause economic harm to both spouses and make divorce negotiations more challenging and contentious.”
Komar said certified divorce financial planners, accountants, realtors, appraisers and therapists and counselors all are likely to see an influx of clients for the remainder of 2018 as divorcing couples try to determine if they should finalize their divorce in 2018 before the alimony changes take effect.
A recent survey of the American Academy of Matrimonial Lawyers shows experienced divorce attorneys across the nation share concerns about divorces becoming more combative. The AAML said 95 percent of respondents anticipate the new tax plan will change the ways in which divorces are settled, and a clear majority of 64 percent believe the cases will now become more acrimonious.
The old law’s tax deduction for higher earning spouses encouraged them to pay more alimony. While spouses receiving alimony will no longer need to pay taxes on that income, it’s not likely that savings will make up for a significantly lower payment.
“The alimony deduction repeal reduces the bargaining power of vulnerable spouses, mostly women, in achieving financial stability after a divorce,” said Brian C. Vertz, author of “Frumkes and Vertz on Divorce Taxation” and a partner at Pollock Begg who has been speaking nationally about the recent tax law changes.
Sharing post-divorce financial goals with a divorce attorney and financial team is important. While adjusting to changing tax liabilities, divorcing couples must rely more heavily on the advice of experienced family law attorneys, financial planners and accountants to understand the intricacies of the new tax code and what it really will mean for each party in the divorce.
About Pollock Begg Komar Glasser & Vertz LLC
Pollock Begg Komar Glasser & Vertz LLC is the largest Pittsburgh-based law firm dedicated solely to family law in western Pennsylvania. Founded in 2001, Pollock Begg is a top-tier law firm as ranked by U.S. News and World Report and a champion for attorney pro bono work, volunteerism and community involvement. For more information, visit pollockbegg.com.
Ideality Communications, LLC
(724) 359-5225 office
(724) 513-0316 cell