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Will the new tax code speed up your plans to divorce?

Like many couples, you and your spouse have probably seen good times and bad. You may even have had years when you discussed the idea of ending your marriage, but for whatever reason, you shelved the idea and carried on. As time goes on, you may be more certain that you will one day divorce, but the question is when.

If you have been on the fence about getting a divorce, you may be among the many for whom the upcoming tax changes spur you to making a final decision. In fact, because of the changes and the complicated settlement negotiations many divorce experts anticipate as a result, those who analyze divorce trends expect a dramatic spike in divorces between now and 2019.

Changes in the law may benefit neither side

Alimony is often unavoidable, especially in marriages where one spouse did not work outside the home. If you are the higher-earning spouse, you may pay a court-ordered amount to your lower-earning spouse to allow time for him or her to adjust to the divorce and seek options for becoming self-sustaining. In some cases, alimony lasts indefinitely, but in recent years, alimony has become a temporary fix in Texas and most other states.

Since the 1940s, alimony has offered a tax break to those who pay. Your former spouse would pay a tax on it, but as the payor, you would not. This may motivate you to offer more to your spouse or to negotiate more generously. In fact, attorneys often use a system of calculating alimony that is based on the current tax laws. However, the new tax code is already causing confusion. Some of the issues and potential drawbacks include the following:

  • If you are paying alimony, you will also pay taxes on it.
  • Your former spouse will not pay taxes on the alimony received.
  • You may be less willing or able to afford adequate spousal support because of the tax burden it places on you.
  • You may be more likely to take your divorce through the courts rather than settling matters at the negotiating table.

It remains to be seen what the long-term effects of the new tax code will be. However, for many, the upcoming changes means hurrying to meet with an attorney to iron out the details of a divorce before the new laws kick in. With the assistance of an attorney who understands the long-term financial implications of a divorce, you will have the benefit of solid advice and guidance.

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329 South Guadalupe Street
San Marcos, TX 78666

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