Divorce - Beware New Tax Laws 2013

Women contemplating or going through divorce may want to talk with a tax consultant, because the bill (ATRA) American Taxpayer Relief Act passed by Congress on January 1, 2013 isn’t exactly a bill that is going to benefit those going through divorce. 

Although this bill was presented in a manner that was specifically for the middle class to prevent or stop federal tax increases, as usual one needs to read the fine print.  What you see isn’t always what you get!

This is merely an FYI type of article that will highlight some of the obvious changes that men and women need to know – the ATRA bill will affect alimony payments. 

Some say lump sum alimony may be a wise route to take if you are good at managing your money.  Although normal alimony payments may fluctuate over the years depending on many variables, the lump sum is a one - time payment never to be visited again.

A lump sum or one-time payment instead of alimony allows one to by-pass paying taxes because the lump sum payments are not taxable.  The payee will find that paying the lump sum isn’t a deductible so it’s best to figure out how alimony payments will be negotiated prior to the divorce.  When alimony is a tax problem - before the divorce is the time to get a new balance between child support and alimony.  Child support is not considered taxable income yet for the one paying support it isn’t a deductible expense. 

It seems that alimony payments will be considered taxable income at this time.  There are ways of maneuvering around this law, but only a divorce tax consultant will be able to explain the necessary steps.   

Another important area to investigate before filing for divorce is the division of marital assets – the new ATRA law may affect you because the new law has a 3.8% surtax on capital gains.  

So if you fall in the new tax bracket it will save you time and probably money to have a consult with a good tax attorney. So many new changes in the tax laws – this is just one more thing to pile on your plate if you’re contemplating divorce.  Also, remember that many states are revising the old grandfather alimony laws and many states have put a stop to the lifetime alimony clauses. 

Maybe in the long run it would be best to confer with a financial advisor who specializes in divorce, taxes and division of marital assets. A great website that goes into depth about the new tax laws is http://www.BedrockDivorce.com  

As Always,                                                

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