The New Tax Law that was recently passed may have an unintended consequence of slowing the Divorce rate!!
The information I am providing is intended to provide some food for thought that would spur people to contact their Attorney and Tax Consultant before filing for divorce.
Divorce is often a very messy event in people's lives. But with the new tax law the situation may have become even more difficult.
Alimony has never been an easy thing to figure out and this seems to be a part of the tax code that has made things sticky.
For years, Alimony has been a deductible item for the payer and a taxable income for the one receiver.
But,accountants and attorneys are still trying to sort this out, the new code seems to indicate that this long standing rule is being changed.
It seems that after Dec. 31, 2018, all divorces will fall under the new code which then will find that Alimony is no longer deductible for the one who is paying. The recipient will not need to declare alimony payments as income.
Since most of those who pay alimony are men and the recipients are women, that the men will take the hardest punch.
However, both parties will actually be affected.
It may end up that neither of them can afford to live separately. The tax deduction for paying alimony allowed the payer to use less money. Now they may not be able to meet the obligation. This could affect the payer's ability to purchase a home.
The recipient may not be able to contribute to their own IRA because funds would need to come from taxed income.
What will happen is yet to be seen.
Many people are scrambling to get their divorce settled prior to the end of the year.
Others, are reaching out to their accountant trying to figure out if they need to adjust their current alimony status.
Attorneys, Accountants and Real Estate agents will need to keep up with what the new tax law really says about divorce and be prepared to advise the consumer.
We as Real Estate agents will want to know how this will impact the sale of the home as well as how will the divorcing couple be able to purchase separate homes.
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