An alimony deduction to be erased in 2019 under the new tax plan has lawyers preparing for a wave of divorces this year—and eying complications for recipients beyond. Payers have long received a tax break on alimony, while recipients have paid income tax on payments. But after Dec. 31, 2018, alimony will no longer be deductible for the payer, and recipients won't need to pay income tax on it, reports Politico. While this will help recipients—primarily women—in one sense, they'll suffer in other ways. As lawyer Madeline Marzano-Lesnevich tells Yahoo, a man in the highest income-tax bracket who pays his wife $100,000 in alimony in 2018 ($85,000 for the woman after taxes) actually pays about $60,000 with the deduction. Without it, he might argue $60,000 is all he can afford to pay, leaving the wife with $25,000 less than before.
Attorneys predict the change will complicate divorce negotiations and lead to more cases being heard in court. But some say women will be disproportionally injured by it. "The repeal reduces the bargaining power of vulnerable spouses, mostly women, in achieving financial stability after a divorce," a lawyer tells Politico. Others point out alimony recipients may have a harder time saving for retirement as contributions to retirement accounts often have to come from taxed income, per CNBC. Marzano-Lesnevich says her firm has already had "a rush of clients … demanding we get them divorced immediately" to avoid such complications in 2019. More couples are expected to follow suit this year. Politico reports removing the deduction is expected to raise $6.9 billion over the next decade and help offset the cost of tax cuts outlined in the GOP bill. (More divorce stories.)
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