Divorce expected to get harder with end of 75-year-old tax law

Changing tax law could make divorces much more difficult come the new year. (KSNV)

Divorces can be a battle, with two sides fighting for what they believe is theirs. Splitting a lifetime of togetherness into two equal pieces isn’t easy.

Now, that process is going to get more difficult.

The issue is a 75-year-old tax law that, as of 2019, is over.

That law lets people change their tax bracket after alimony is decided.

“There have been a lot of people trying to get divorces finished prior to the beginning of the year. Why’s that? We have this tax law change that dramatically affects alimony,” said divorce attorney Emily McFarling.

Let’s put it this way:

  • Person A makes $100,000 a year and is taxed 32 percent, while person B doesn’t have any income.
  • In the divorce, person A agrees to pay person B $38,000 in alimony and keep $62,000.
  • That would change the tax bracket person A belongs to.
  • Instead of paying 32 percent on their income, they would pay 22 percent.
  • Person B would pay 12 percent on their alimony.

This example divorce agreement would save person A $18,000 a year.

That’s a lot of money, and that savings helped settle a lot of arguments.

Now, next year, “If you have that person who makes $100,000, and they move a portion in alimony, they still pay 32 percent. They still pay taxes on all of it. We used to negotiate alimony because it was of mutual benefit to move that money, but we can’t do that anymore,” McFarling said.

So, why do it?

According to congressional estimates the country is going to get close to $7 billion in new tax revenue over the next ten years.

They’ll be keeping divorce attorneys busy while they do it.

close video ad
Unmutetoggle ad audio on off

Trending