Tis the season....for divorces?
A few days ago, I appeared on Fox News discussing a change in tax law that goes into effect January 1: alimony will no longer be tax deductible. It's a worrying change for those whose divorces won't be finalized before the end of this year.
For all intents and purposes, because of what is left this year, that ship has already sailed as far as finishing a case and making an agreement which will allow alimony to be deductible. Of course, if you are in the throes of the last act in a divorce, you may still be able to do this, but wait, it’s not that bad. Although it is not deductible after January 1st, within a short period of time, I am sure the lawyers will do the arithmetic and there will be a reallocation of alimony as far as ex-husbands and ex-wives are concerned so that both parties will probably end up in the same place, as far as money is concerned, as they are now. If a deal was made where alimony is deductible in the last week, it would still carry over into the new year. For those few husbands who are able to deduct payments because of a last-minute agreement, one could suppose this would be the ultimate holiday gift, but since a divorce settlement is complex and multi-layered, to rush into it just for the sake of doing it may be short-sighted.
The state taxes that you pay are also not going to be deductible as against the federal taxes. Here, also, the state governments may make some arithmetic computations that will try to get you to the same place as far as credit for the state taxes. It may sound quite cruel to suddenly take away deductions from the state taxes that one pays in high tax states like New York and California, but the argument on the other side is, why should the rest of America have to pay for a poorly functioning state government burdened by all sorts of give-away programs?
Actually, if you're eager to get divorced, this time of year is perfect for planning: meeting with a lawyer, getting records together, and preparing a course of action. The holidays are complicated--there's a feeling that you're supposed to be with family--but actually they're the ideal time to get things lined up towards putting divorce proceedings in motion in early 2019.