Divorcees Warily Eye GOP Plan to Cut Alimony Tax Deduction
November 16, 2017
LAWYER: Madeline Marzano-Lesnevich, Esq. — HARTFORD, Conn. — For over a decade, Charles Crenshaw has been paying his ex-wife tens of thousands of dollars annually in alimony. The now-retired engineer is hoping to renegotiate the agreement for lower payments, but he’s waiting first to see what comes of a tax reform proposal in Congress.
Under a House Republican tax plan that would eliminate the deduction for alimony payments, the 73-year-old resident of Bloomfield, Connecticut, says he could lose thousands of dollars.
“I’m contacting my congressman,” Crenshaw said, “to say that’s something that should be left alone.”
He is among many unhappy couples, divorce lawyers and other keeping a close eye on the proposal, which would also end taxation of alimony recipients on the payments.
The House approved eliminating the deduction Thursday as part of a nearly $1.5 billion package to overhaul corporate and personal taxes. The proposal remains in limbo, however, because it is not included in the Senate tax plan that GOP leaders hope to pass early next month.
Getting rid of the write-off is generating concerns about the possibility of higher taxes for men, who make up the majority of those paying alimony, and more acrimonious divorce negotiations.
A national group of family law attorneys, the American Academy of Matrimonial Lawyers, announced Thursday that it is against the proposal.
“Alimony is an essential tool that has enabled countless spouses to adjust to a dramatically altered economic reality,” Madeline Marzano-Lesnevich, president of the academy, said in a statement. “The financial security provided to families by spousal support is a valuable resource that needs to be further strengthened and not diminished by our representatives.”
Toni Van Pelt, president of the National Organization for Women, said the tax change could make it more difficult for divorcees to get the support they need because their ex-husbands would have less money without the deduction.
“It’s something that’s really important to women,” Van Pelt said. “We are really concerned because it would make tough, tense negotiations between couples even worse.”
The changes would take effect Jan. 1 and apply to divorces finalized after 2017. Some lawyers say it’s unclear whether the proposal also would affect existing divorce and separation agreements that are modified on or after Jan. 1.
In a hypothetical example, a man making $90,000 this year and paying $20,000 in alimony would get to subtract the $20,000 from his income, lowering his tax bill by $5,000 to $13,245, according to the IRS draft tax table for 2017. His ex-wife would pay about $2,500 in taxes on the $20,000, but no taxes under the House GOP plan.
Thomas Shanley, a divorce and family law attorney in Greenwich, Connecticut, said he has a few clients trying to get their divorce cases finalized before the end of the year because of the proposed tax change.
“I think it’s going to have a serious impact on the financial status of parties post-divorce,” he said. “It’s likely to increase the family’s tax burden and make less money available to the divorced spouse and children.”
Manhattan divorce attorney Steven Mandel said eliminating the alimony deduction could make divorce negotiations tougher. He said many of his clients are concerned about the proposal.
“If they realize they might not get the deduction, they might not be willing to pay so much,” he said.
U.S. House Speaker Paul Ryan, a Republican, said passing the overall tax legislation “is the single biggest thing we can do to grow the economy, to restore opportunity and help those middle income families who are struggling.”