Divorce and the 2018 Tax Law Change Snapshot

I came across this exchange with Jim Tankersley who covers economic and tax policy for The New York Times and Ailsa Chang from NPR. Jim gives a nice summary of the dynamics involved that are driving financial advisors to get a strategy in place for all their clients that are party to a divorce settlement before the end of 2018. He also points out that the men do not have as much to lose with the new deal.

There’s a link at the bottom to the whole conversation but here’s a few examples of how Jim lays it out:

CHANG: So the couples that will be most impacted by this are those wealthiest ones in the top tax bracket.

TANKERSLEY: Absolutely because it means the most for them because they’re getting the biggest break from their taxes ’cause they pay the…

CHANG: Right.

TANKERSLEY: …Highest marginal income tax rates. 

CHANG: And I can imagine most couples that have severely disparate incomes – it’s usually the woman who earns less. So this tax law change will probably have women bearing most of the cost.

TANKERSLEY: That’s what divorce lawyers and tax professionals and financial planners have been telling me – is that, yeah, it’s largely women who receive alimony. And particularly with wealthy couples, it’s largely women who leave the labor force to take care of kids or for whatever reason. And women earn less in the economy for the same work than men do. This is a potentially big loss for women…

CHANG: What was Congress’ rationale for getting rid of the alimony tax break?

TANKERSLEY: This is a way to raise revenue for the government. So by closing this loophole, they’re going to get more money in taxes, and therefore they help offset some of the enormous other costs of the rest of the tax bill.

 It’s also, again, a drop in the bucket of a $1.5 trillion tax cut.

To read the full interview click here

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