Trump's Tax Plan Has HUGE Implications Upon Divorce
In Washington State, when a party to a divorce is ordered to pay support (also known as maintenance, or alimony) to a former spouse, that payment is tax deductible. This means the party paying support ("payor") receives a tax benefit for the amount paid and the party receiving support ("payee") must pay taxes as earned income. However, the current tax system is about to undergo a big change.
Currently, divorce settlement is often reached when the parties agree to larger payments of support at a lesser after-tax cost to the payor. This is often seen as mutually beneficial for both parties as the payor receives the benefit of a reduced tax obligation and the payee receives the benefit of more income than might otherwise be forthcoming if the payee spouse was not receiving the tax deduction benefit. This will all change under the new tax plan.
Beginning in 2019, payments for spousal support will no longer be tax deductible for the payor. Additionally, the payee will no longer be taxed on the amount received. This will create a total re-evaluation of some divorce cases, as the higher earning spouse will now have increased leverage to argue for a lower support payment.
There are still some financial benefits that will remain for divorced spouses. For example, upon retirement, a person can claim spousal Social Security benefits based on the earnings of a former spouse, provided the couple was married for at least 10 years and the claimant remains unmarried.
Family law litigation can be emotionally difficult and complex. Decisions made about each step of the litigation can affect you for many years. We have years of experience helping our clients with complex property settlement and spousal support issues and can help you through the process. Contact us today at (253) 838 – 3377 or email at email@example.com, to talk about your situation.
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