W. Tyler Moore, PC

Tax bill could significantly affect divorced couples in Texas

People in Texas who have been following political news may be aware that the proposed Republican tax bill could negatively affect those who pay spousal support. However, do those who are contemplating ending their marriages and are anticipating having to pay spousal support need to rush to finalize their divorce before the bill becomes law, especially if their divorce will be a high value divorce?

Under the proposed Republican tax bill, those who pay spousal support would not be able to deduct their spousal support payments from their income taxes. As the law currently stands, spousal support payments are deductible, so this bill would turn that deduction on its head for paying parties. Moreover, those who receive alimony under the proposed Republican tax bill would not have to count those payments as taxable income. As the law currently stands, spousal support is counted as income for those who receive it, so again the proposed tax bill would significantly affect those who receive spousal support.

However, this doesn't mean people need to rush to get divorced before this bill becomes law -- at least, not yet. This is because under the proposed Republican tax bill, these new spousal support provisions would only be applicable to divorce decrees executed after December 31, 2018. It may be possible in some circumstances, however, for divorce settlements that are renegotiated after that date to have provisions in which the parties agree to opt out of these new spousal support provisions.

Those who are not in favor of the bill believe that it would put the paying party in a more difficult financial position and would also make it so the receiving party (who generally earns less income than the paying party) would not get enough in the way of financial support. However, whether one is in favor of this bill or against it, if they are already divorced or are contemplating ending their marriage, they may want to discuss the matter with an attorney who can explain how this proposed law will affect them if it is enacted.

Source: Bloomberg, "Why You Don't Have to Rush to Get a Divorce Before 2018," Alexis Leondis, Dec. 18, 2017

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