The new tax bill and its implications on divorces might have caused confusion for many couples in Michigan and other states. Those who were considering divorce might have tried to get it done before the New Year. However, the new alimony tax laws will only apply to divorces that are finalized in 2019. Authorities say that not only could it create timing battles between divorcing spouses but also their legal counsels.

Currently, for a spouse in the highest-tax bracket who is ordered to pay annual alimony of $100,000, the tax deduction at a rate of 40 percent will effectively reduce his or her expense to about $60,000. For the recipient of that alimony, it is a taxable income, and after paying tax at a rate of 15 percent, he or she gets to keep $85,000. However, it is said that with the new law, alimony orders may be for lesser amounts because the payer will get no tax benefits.

If that is the case, that same paying spouse may be ordered to pay only $60,000 per year because without the tax deduction he or she will have less money. This will leave the receiving spouse with no more than $60,000. Depending on the way in which the new law may affect divorcing parties, spouses might urge their legal representatives to either drag out or speed up the process, and this may cause additional conflict in many divorce cases in 2018.

Michigan individuals who are considering divorce may have questions about the manners in which the new alimony tax laws will affect them. Timing is going to be critical, and the support and guidance of an experienced divorce attorney may provide insight. A lawyer can consider the person’s circumstances and suggest the most appropriate way to proceed.

Source: finance.yahoo.com, “Trump’s tax bill will make 2018 a wild year for divorce“, Ethan Wolff-Mann, Jan. 10, 2018