More couples inquiring of divorce with new tax act
Divorce rates have been on the decline, according to recent data—but that could all change again, thanks to the new tax act.
Shannon Parvey, a family law attorney and partner at Parvey, Larson, and McLean in Fargo, says the Tax Cuts and Jobs Act of 2017 has made cutting ties a hot topic.
"The reason that people are thinking about divorce perhaps right now in 2018,” Parvey said, “because this particular portion of the tax law is not gonna be affecting taxes until 2019."
The previous 75-year-old tax law—that's still in effect right now—gave a deduction for the one paying alimony.
"If you're paying spousal support,” Parvey said, “it's really not dollar for dollar what it's going to sound like to you."
Meaning: let's say in a divorce, you owe $1000 in spousal support.
"Depending on your tax bracket where you fall,” Parvey said, “you're really not paying that thousand dollars, you're paying more like $700."
But after this new tax act, you'd actually be paying the full $1000.
Which is why Parvey says she's getting more inquiries about divorce now—before the new law takes effect in 2019.
"If you get divorced in 2018, you're still grandfathered in under the old tax consequences, the old tax law," she said.
And it's not just here in North Dakota: Michelle Piscopo, an attorney of matrimonial and family law at Blank Rome LLP in Philadelphia, Pa. says she's seeing it too.
"We're not necessarily seeing a surge in the number of divorces being filed,” Piscopo said, “but the cases that we already have on going if there was going to be an alimony claim, we are seeing a rush to get those finished....before the end of this year."
Which Piscopo says is not an easy feat.
"Divorces can take a year or longer," she said.
But it can be pulled off, she says, if both parties cooperate.
Meanwhile, Shannon Parvey, a family attorney here in Fargo, says it’s tougher to negotiate alimony when spouses paying support will have to pay more.
"It was a nice negotiating point for us to be able to talk about that, and now...people who are paying it are going, 'uh, I may be not as inclined to feel like I can pay as much as I would have before,’" Parvey said.
And according to other reports, losing that negotiating point could cost alimony recipients up to 15 percent of what they would have gotten before the law changed.
While this particular tax change won't take effect until 20-19, the same is not true for some other revisions.
Certain other changes are already in effect for the 20-18 tax year. But as most people are currently filing for the 2017 year--they'll likely not feel any of the effects until next tax season.