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Post by flyingsolo on Feb 5, 2018 16:56:23 GMT -5
All:
I'm not sure you are aware of this and it sounds like there are a lot of people on the fence about whether to stay in a SM or go, so I wanted to make sure you are aware of this big change with regard to alimony. Currently in the US, alimony (not child support) is deductible for tax purposes for the ex-spouse who pays it and includible in the gross income of the ex-spouse who receives it. With the new Tax Cuts and Jobs Act which passed at the end of December, 2017, the tax treatment of alimony completely changes after December 31, 2018. Now, for any divorce or separate maintenance agreements executed after December 31, 2018 or executed before that date and later modified after it, the alimony payments are not deductible by the payer or includible in the income of the recipient. This is HUGE if you are in an alimony scenario now and you subsequently modify the agreement after December, 2018 or you are in the divorce process now or contemplating it in the future.
Just wanted to let you all know about this big change. It may start your clock ticking a little faster depending on what end of the alimony scenario you are on.
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Post by ModCasper on Feb 5, 2018 17:01:44 GMT -5
Sorry, for clarification, the title of the thread should have indicated it is changing in 2019 (after December 31, 2018). FYI: the author of the OP can change the title of a thread. Simply click "Edit" on the original post; you'll see the "Subject" line is editable. (Moderators can do this, too.)
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Post by Deleted on Feb 5, 2018 23:20:39 GMT -5
Thank you for this. If I can convince my H to do an amicable, mediated divorce (my first choice), this is the sort of thing that will sway him. This and getting out before the 20 year mark, which means lifetime maintenance. (Trying to avoid going all legal on my H.)
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Post by greatcoastal on Feb 5, 2018 23:36:49 GMT -5
However, once the person receiving life long alimony gets re married. No more alimony. If they increase their wages, you can re-file and the alimony gets greatly reduced. Also if you reside in the same dwelling for more than a month, with someone of the opposite sex (other than family) no more alimony ( I need to look up the wording on that one) I recall that this was similar to having someone live in a rental property for more than a month, they are now considered a tenant, (not a guest) ,and the landlord has the right to up the rent, or evict the tenants. Also if you are receiving alimony ,and they leave the country you are SOL.
This is where having options that an attorney is familiar with, can be used for leverage at the mediation table. Lump sums verses long term alimony.
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Post by baza on Feb 6, 2018 1:51:19 GMT -5
Presumably, a revision of tax law will be a Federal Government initiative, and apply to all States ? That would be the case in my jurisdiction (Australia).
Side-bar Again highlights the advisability of seeing a lawyer in your jurisdiction. A concept bandied about here all the time, but seemingly not often acted upon.
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Post by DryCreek on Feb 6, 2018 2:22:16 GMT -5
Oh, the clever little bastards... ensuring the money gets taxed at the highest possible income level.
Of course, the amounts can be negotiated to account for tax effect, but I do wonder if it's enough to motivate stubborn primary breadwinners to cooperate before 1/1/19. It's like an instant 30%+ whammy that you have to negotiate away again.
Incidentally, I'm told there's a phrase that can be added to the agreement that essentially says "this is not subject to adjustment / renegotiation", meaning neither party can drag the other back to court for an increase/decrease, which would be extra important given that it could trigger a different tax effect. Even without that, it could become a perpetual process.
@elle, lifetime support is nothing to sneeze at on either side of the table. Sounds like he better "kiss it or kill it" pronto either way; sitting on the fence is only gonna get him splinters.
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Post by wom360 on Feb 6, 2018 14:38:28 GMT -5
The IRS has always been pretty aggressive in trying to make alimony something different. If alimony stops when a child turns a milestone age like 18 or 21, then it's taxed as child support under audit. If it doesn't stop at the payers death or the recipient's remarriage, it's not alimony. If it goes down to quickly, it's assumed to actually be part of the property settlement. www.irs.gov/taxtopics/tc452As a CPA, this new law makes my head hurt. And not just the alimony part...
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Post by bballgirl on Feb 6, 2018 15:08:25 GMT -5
After being married for over 2 decades, I was eligible for alimony for life. However he was eligible for half of my pension. So I used the alimony card as a negotiating tool. I traded him not touching my pension and I wouldn't go after alimony. I really didn't want alimony. I would have had to pay taxes on it and it would have reduced my child support which I don't pay taxes on. Mine was a very amicable divorce however I did lawyer up and I did not go the route of mediation just to protect myself. Cost me $3000 total.
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Post by DryCreek on Feb 6, 2018 15:44:21 GMT -5
Good call on getting professional advice, bballgirl, even if it's amicable. People often overlook the tax status of their assets, and the tax effect of different options. It can be a huge factor in whether it's really a fair deal. I'm coming to see that divorcing after 20+ years, and especially later in life, is financially pretty devastating to a sole provider. Not only losing half of a retirement that probably can't be replaced at that point, but a large and lengthy alimony hit to make certain. Further reason to nip this shit in the bud early and screw the 10-year exit plan that some have in mind.
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Post by ironhamster on Feb 6, 2018 18:11:13 GMT -5
Definitely don't stay twenty.
In my case, alimony will be permanent, unless she cohabitates or gets married. That would not be so bad, but I have had three years at work with lots of overtime. I have been taking it to cash flow our kids college expenses. Now, I will be locked into taking it because that is what my alimony will be based off of.
The good news is my wife will be required to pay 30% of our kids college, so maybe it will all balance out. I won't be as locked in as I originally thought.
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