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Connecticut divorce: New federal divorce tax penalty

On Behalf of | Nov 8, 2017 | Divorce |

The way alimony is taxed would be changed if a recent tax bill coming out of Washington becomes law. The way things are set up now — Connecticut included — is that alimony payments are tax deductible for the former spouse who is paying. The ex spouse who receives the alimony is the one who pays income tax on the funds. But those who divorce if and when the bill becomes law will be privy to a new way of doing things.

Under the proposed plan, alimony would come out of dollars after tax and the recipient of alimony funds would no longer have to pay tax on the money. The move would increase the amount of tax divorced couples would be paying overall. The payer usually is in a higher income bracket and consequently is in a higher tax bracket.

A divorce tax bonus won’t be eliminated, but a divorce penalty would be created. The move would line the coffers of the federal government since it would stand to collect $8.3 billion more in taxes over the next decade from divorced couples. Experts are thinking these kinds of financial ramifications of divorce may mean couples will try to stick it out, rather than shell out that much tax money. It may also cause increased unhappiness if a couple feels trapped in an unhappy situation.

Divorce laws are always evolving or changing. Those who are considering divorce might do well to talk to a Connecticut lawyer about the possible ramifications of the current proposal, which may — or may not — get enacted into law. An attorney experienced in family law will be up on all new law and regulations regarding divorce and will guide his or her clients accordingly.


Source: ctpost.com, “The Republican tax plan imposes a new divorce tax penalty,” Josh Barro, Nov. 3, 2017