Many people in Missouri and throughout the country may be escalating their divorce plans to finalize their settlement agreements prior to Dec. 31, 2018. That is the date on which certain tax benefits will be eliminated by the Tax Cuts and Jobs Act of 2017. At that time, for example, the tax break traditionally given to those who pay alimony will be eliminated, making divorce negotiations more difficult and perhaps more damaging to those who counted on alimony as a significant source of support post-divorce.
Because the alimony payer will no longer be able to take the deduction at tax time, the benefit and attractiveness of paying will diminish. For those who want to stick with the current system, and who do not want to experiment with what the future may hold after the changes, they will attempt to finalize their divorces by the end of the calendar year 2018. It remains to be seen whether there will be a national rush to the altar of divorce, but it seems likely that there will at least be a spike in filings and settlements coming up soon.
It is feared that the elimination of the alimony deduction will disproportionately impact women and children, who are usually in the lower end of the financial spectrum and, by necessity, the great majority of those who receive alimony. There will likely be less money transferred to women due to the new tax policy. Women also take on a greater risk of income decline after a divorce, which is a fact that will put their children at greater risk.
After losing the deduction, the higher-earning spouse is expected to negotiate for smaller alimony payments rather than paying higher amounts that no longer provide a tax benefit. The new tax code also provides for the suspension of the dependency exemptions from 2018 through 2025. This exemption has always been significant and has averaged $4,050 per child. The loss of this exemption will make divorce negotiations all the more difficult for many people in Missouri and elsewhere.
