If you have been pondering divorce, a tax bill being considered by Congress could be the incentive you need to make a decision. If passed, a key tax deduction related to divorce would go away.
Currently, divorced people in Virginia and around the country may deduct the amount they pay in spousal support from their federal income taxes. The tax bill would eliminate that deduction, according to The New York Times.
What this means
This would have a few interesting implications. First, Congress’ Joint Committee on Taxation estimates that ending the alimony deduction would increase tax revenues by $7 billion over 10 years.
On the other hand, it could significantly reduce how much spouses could expect to receive in alimony in the future, especially in cases where the paying spouse makes much more than the recipient. It is common when one spouse demands alimony for the payor to negotiate a higher payment, often in exchange for concession on property division, to take advantage of the tax break.
If the alimony deduction goes away, higher payments will be more of a burden on high-income exes. It could also cause them to demand lower spousal support payments, reducing their exes’ financial stability.
Possible changes start in 2019
If this provision is part of the final tax bill, it would apply to all divorces finalized after Dec. 31. Thus, if you expect alimony to be a factor in your divorce, it may make sense to file as soon as possible.
Many divorce cases don’t involve alimony, but this story shows how changes in the law made in Washington can affect your case here in Virginia. Make sure your divorce lawyer keeps up to date on all the laws related to family law.