Right now, as current tax laws stand, those in Michigan and elsewhere who pay alimony to former exes have the ability to claim their payments as deductions on their taxes. This is a benefit that saves them upwards of thousands a year. If the current GOP tax plan passes, though, this is a benefit that may soon disappear. According to professionals in the divorce law field, this could prove devastating to the average divorced American.
The Tax Cuts and Jobs Act, which is now under review and still being revised, includes something many are calling the divorce penalty. This penalty is that those who are ordered to pay alimony will no longer get to claim their payments as a tax deduction. For those who are quite well-off, this penalty will not make much of a difference. For everyone else, though, both the payer and payee could end up hurting economically.
In the year 2015, approximately 800,000 couples in the United States ended their marriages. That equates to roughly 100 divorces every single hour. Many of these cases involve older couples, as the divorce rate among younger couples has and continues to decline. Younger or older, alimony is awarded to help the economically needy spouse stay financially afloat. If this tax penalty takes effect, it could lead to fights over paying alimony in general and fierce discussions about how much the bread-winning spouse should really have to pay.
Alimony, without the proposed tax changes, is already a difficult subject for many couples. If this divorce penalty becomes law, many marriage dissolution cases may wind up being resolved through litigation rather than less expensive alternative means. Only time will tell what will happen with this. Until then, those going through the divorce process in Michigan can turn to a divorce law attorney in order to seek the fair and balanced dissolution settlements that may or may not include alimony.
Source: Bloomberg, "The GOP Tax Plan Could Make Your Divorce More Expensive", Tom Metcalf and Christie Smythe, Nov. 8, 2017