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Category Archives: Budget

New Tax Bill Just Erased Your Alimony Deduction

President Trump recently signed the giant tax overhaul that includes a provision scraping a 75-year-old tax deduction for alimony payments.

Alimony payments, typically defined in the terms of a divorce settlement, are the payments someone gives to an ex-spouse who earns less money. Statistics vary, but The IRS says that approximately 600,000 Americans claimed an alimony deduction on their 2015 tax returns, the most recent year for which data is available.

Under the prior law, ex-spouses paying alimony were able to deduct the expense from their federal income taxes. Ex-spouses receiving alimony payments were able to claim the money as taxable income. The recipient of alimony had to include any payments of alimony as income on their tax return, which subjected them to income tax on each dollar received.

That all changes soon. Although the recent repeal of the provision won’t impact couples already legally divorced or separated (not even those finalizing the process in 2018), but it will impact those ending their marriages in 2019.

In any divorce commenced after December 31, 2018, the spouse paying alimony can no longer deduct it and the spouse receiving the money no longer has to pay taxes on it. Divorce lawyers say the current setup tends to preserve more money overall to allocate between spouses, which helps them afford living separately.

Some experts worry the change will make negotiations tougher and lead to less spousal support as cash goes to taxes instead. Congressional tax writers say it’s only fair to married couples.

Why the Change?

The tax-writing House Ways and Means Committee calls the alimony deduction a “divorce subsidy.” Last month, the committee noted, “A divorced couple can often achieve a better tax result for payments between them than a married couple can.”

The panel also argued that alimony should be treated like child support, which isn’t tax-deductible for the payer or taxable for the recipient.

David George, a CPA/PFS in California, offered this opinion: “I believe the reason for the change was as a money-raising effort, since usually the payer who gets the deduction currently is in a higher tax bracket than the recipient.”

The non-partisan Joint Committee on Taxation estimates repealing the deduction will add $6.9 billion in new tax revenue over 10 years. That’s equal to less than half a percent of the $1.5 trillion tax cut plan.

Why the Worry?

If alimony is no longer deductible, the ability of an ex-spouse to pay may be limited due to other fixed expenses, such as child support payments and education expenses for children. New York attorney Malcolm S. Taub foresees future alimony recipients losing 10 to 15 percent of what they’d get under the current law. He says lawmakers are “taking money from people who’ve undergone the trauma of divorce, and they’re taking money from people at one of the worst times of their life.”

Most of us understand that divorce creates a trauma—not only for couple involved, but, most notably, for their children. Two separate families cannot live as cheaply as one. With this new tax structure, it will be difficult for divorcing couples to instantaneously make lifestyle adjustments which coincide with the necessary reduction of income to each spouse.

What About the Money?

New Jersey lawyer Madeline Marzano-Lesnevich says scrapping the alimony deduction “changes the economics of many divorces.”

As an example, let’s say high-earning Spouse A agrees to make alimony payments of $100,000 annually for 10 years to Spouse B. Spouse A might save $40,000 a year through the deduction, while Spouse B, who is in a lower tax bracket, could owe $15,000 on the $100,000.

Without the alimony deduction and tax benefit, maintenance payments to the lower-earning spouse will be smaller, says Marzano-Lesnivich. The higher-earning spouse may now be less willing to agree to lump-sum settlements because there’s no longer a discount for the tax deduction.

Divorce matters are complicated, especially in regard to financial concerns. Alimony is a matter to be resolved by an experienced and skilled divorce attorney, which is why GreeneWilsonCrow strives to offer you comprehensive legal counsel, care, and representation. Our team will ensure you and your rights are protected following the tax implications of this bill and your divorce.

For more information or to schedule a consultation, call (252) 634-9400 or visit www.greenewilson.com.

(Sources: PBS News Hour; Forbes Magazine; Associated Press; CBS News; Financial Advisor Magazine; Fox Business; and U.S. News & World Report.)


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Don’t Let the Stress of the Holidays Ruin Your Marriage

As Christmas nears, it can be either a season of cheer or a season to fear. The stress of the holidays, with all its planning, negotiating (whose parents should you visit this year?) and the financial strain of gift-giving can make you want to throw away the mistletoe. Don’t let Christmas pull you and your spouse apart.

Between Thanksgiving, Christmas, and the New Year, you’re crazy busy. And if you’re married, that may mean the holidays take priority over your spouse for two months of the year.

It’s easy to fall into that trap, but the last thing you want is to sabotage your marriage. Because this time of year is notoriously stressful and hectic, keeping an open line of communication with your spouse is more important than ever.

You both want what is best for your family—and each other. But when you’re trying to schedule Christmas parties, order gifts for family and friends, and get the house prepared for your visiting in-laws, you might forget your spouse is actually your teammate.

But here’s the thing: You’ll have a better, happier holiday if you make sure to prioritize your marriage during the holiday madness. Your family and your relationship with your spouse will be better if both of you are on the same page and working together—instead of running in opposite directions.

Here are a few ideas from Focus on the Family that might help you keep your marriage in perspective…and keep the seasonal stress at a minimum during this busy time of year.

Gift Giving

Buying gifts for everyone on your list can put a lot of financial and emotional stress on a couple. On the Holmes and Rahe psychological stress scale, Christmas traditions are listed as more stressful than minor law violations, and financial difficulties rank equal to the death of a close friend! Combined!

  • Set a budget: Keep the “ghost of Christmas past” from haunting your credit card statements and your thoughts. Look at your finances together and create a realistic spending limit for the Christmas season. Account for any upcoming expenditures you may have in the new year. Marriage therapist Marion Goertz recommends enlisting an objective third party if you and your spouse can’t agree on a budget.
  • Make a list and check it twice: Work with your spouse to determine exactly who’ll be receiving gifts. If your budget is tight, don’t be afraid to take cost-cutting measures. For example, you could give one gift per family instead of to each individual.
  • Get creative: You don’t have to buy presents from the mall. Baked goods and handmade crafts can be budget-friendly and memorable.
  • Don’t wait until December 24: Last-minute shopping is rushed, stressful, and often offers up nothing but the slimmest of pickings. Keep an eye out for sales all year and store the gifts until Christmas. If you plan in advance, you’ll save money and cut down on stress.

The In-laws

Decking the halls is great; decking your in-laws? Not so much. Holiday stress, paired with disagreements with or about your spouse’s parents, can make you want to climb up the chimney.

  • Talk to your spouse: Disagreements with or about your in-laws can make your spouse feel threatened or defensive, and likewise for you if your spouse doesn’t get along with your parents. Make it clear that you love your spouse unconditionally and that any holiday tensions, big or small, don’t change that.
  • Take a break: At a family gathering, don’t wait until you’re so frustrated that you engage in a verbal conflict. If things start grating on your nerves, take a break and step away from the situation. A walk outdoors or a quick jaunt to the store can give you the breathing space you need to calm down before things get out of control.
  • Plan ahead: Waiting until the Christmas season to announce that you’re not planning to attend Christmas dinner can create disappointment or resentment in your in-laws. Plan your holiday schedule with your spouse months in advance and alert each set of in-laws about your plans.
  • Look inward: Sometimes, it’s not the in-laws who are grumpy and disagreeable. You may not be able to change them, but you can change yourself and your personal reaction to situations.

Enjoy the Season Together

It’s easy to be swept up in the consumerism of the season, but remember that it isn’t about money and materialism. Focusing on its religious purpose or enjoying time with your loved ones can keep you from stressing over less important things.

  • Discuss expectations: Everyone has a different childhood tradition or expectation that defines the holiday for them. Talk to your spouse about the seasonal practices and traditions that mean the most to you. Together, you can create new traditions that encompass both of your expectations so no one’s left feeling like the holiday lacked a little luster.
  • Share the to-do list: Whether it’s stringing the lights or hanging the stockings, share the common Christmas tasks. Not only does it make the work fly by faster, but it’s also an opportunity to spend time together, enjoying another treasured aspect of the Christmas tradition.
  • Be generous: Giving to others during Christmas, you can capture the true essence of the season. From serving at a local soup kitchen to volunteering in your church’s Christmas performance, getting involved in the community reminds us of what Christmas really means.

Having these conversations with your spouse will keep you on the same page and remind you both you’re in this together. You’re going to be less stressed if you know you’re working with the same goals in mind–freeing you to enjoy the holidays rather than stress about how you’re going to get everything done.

And keep this in mind: You don’t have to do it all. You can make the holidays memorable without making them perfect…and that’s perfectly okay.

For more information or to schedule a consultation, please contact GreeneWilsonCrow Attorneys at Law by calling (252) 634-9400 or visiting www.greenewilson.com.

(Sources: National Retail Federation; Las Angeles Times; Ramsey Solutions; U.S. News and World Report; Australian Securities & Investments Commission; USA Today; and Focus on the Family Canada.)

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