Couples across the country are racing to finalize their divorces before the end of the year. Courts have indicated that they are already seeing more divorce cases than is typical for this time of the year. Why? Starting January 1, 2019, new tax laws go into effect. Some of these laws will have a significant impact on the divorce process.
One change in particular – involving spousal support – is motivating many couples to speed up their divorce. The new tax laws abolish the income tax deduction for spousal support. Unless your divorce is finalized by December 31, 2018, you’ll be affected by the new law. In this article, Los Angeles divorce lawyer Steven Fernandez explains the new laws in detail and what you can do to protect yourself.
How Does the Alimony Deduction Help Me?
If your divorce was finalized today spousal support would be a deductible expense. In other words, the spouse who is required to pay alimony could deduct those payments on their tax return. Let’s say your spouse, who earns $95,000, is ordered to pay you $20,000 in spousal support every year. Since your divorce was finalized before the end of the year, they can deduct $20,000 on their income tax return. With the deduction, your spouse can lower their income to $75,000. This puts them into a lower tax bracket and reduces the percentage of taxes they’ll be required to pay. This is a serious motivator for many people when it comes to negotiating alimony.
Now let’s say that your divorce isn’t finalized until January 2019. Any alimony payments made by your spouse will not be deductible. So, they’ll be required to pay you but not be able to reduce their income. Their tax bracket won’t change and they’ll be paying taxes on money they really never had. You’ll also be paying taxes on that money, as well.
In the second scenario, your spouse has little-to-no motivation (other than empathy and goodwill) to agree to pay spousal support. They alimony won’t be deductible so there’s really no benefit in paying it. They will be much more likely to put up a fight and contest any requests for spousal support. They’ll probably fight tooth and nail to minimize whatever payments will be required.
Courts Expect a Backlog of Divorce Cases
Courts in California have already noted that they expect to see an increase in divorce cases as the year comes to an end. In anticipation, many have begun to clear matters that are clogging up the system. While the courts will do everything they can to get to every request, there is no guarantee that your divorce will be approved before the end of the year if you wait too long to submit the necessary paperwork. Lingering issues in your divorce – child custody, child support, property division – can extend the process. If courts need to step in and make decisions for you, the chances of getting everything finalized by January are slim.
You can take certain steps to speed up your divorce and make sure your local court has everything it needs to finalize your split by December 31st. These include:
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Using a mediator to help you and your spouse make mutually-agreeable decisions
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Arbitrating your divorce privately
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Committing to the collaborative divorce process, or
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Sitting down and speaking with your spouse about the seriousness of the situation.
Resolving issues on your own, or with the help of a neutral third party, can help to speed up your divorce. The less a court has to do, the sooner your divorce can be finalized. If your divorce is finalized by the end of the year, you can enjoy the benefits of the alimony deduction.
Do you need help with your Los Angeles divorce? Are you interested in learning more about your legal rights and options? Contact Fernandez & Karney for help. Our Los Angeles family law attorneys are here to help.