PRESIDENT TRUMP’S DECEMBER 2017 TAX PLAN ELIMINATES DEDUCTIONS FOR ALIMONY PAYMENTS

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The burden of paying spousal support is about to reverse.  That’s because there’s a new tax law called, Tax Cuts and Jobs Act (TCJA), that was passed by Congress in December 2017, that has effectively abolished tax deductions on alimony payments beginning January 1, 2019.  Under the new Tax Cuts and Jobs Act, alimony payments will be neither tax deductible for the paying spouse nor taxable in the hands of the recipient spouse.

This new law will apply to payments that are required under divorce or separation instruments that are:

(1) executed after December 31, 2018, or,

(2) modified after that date if the modification specifically states that the TCJA treatments of spousal support payments (not deductible by the payor and not taxable income tax by the recipient) applies forthwith.

This new alimony provision is not retroactive, and it does not apply to divorces and separation orders entered into before 2019.

Until this new law, paying spousal support could be considered a “win-win” situation for both divorcing spouses.  The payor receives the benefit of a reduced tax obligation and the payee receives the benefit of more income than might otherwise be forthcoming if the payor spouse wasn’t receiving the benefit of the tax deduction.

This change in law could now prove expensive for individuals who must pay spousal support, because the tax savings normally derived from deducting spousal support payments can be substantial for high-earners.  One of the biggest disadvantages of the new tax law is that it could affect the desire of a higher-earning spouse to settle with their dependent spouse, since the deduction acts as a great motivator for the higher wage earner to agree to help support the spouse with less income in the first place.

WINDOW IS STILL OPEN

There is still a window for the payor to receive deductions for spousal support payments, but that window is closing.  If you are involved in divorce proceedings, or you are thinking about divorcing, and you want deductible spousal support treatment for some or all of the payments that you will make to your soon-to-be-ex, the TCJA gives you a huge incentive to get your divorce agreement wrapped up and signed by December 31, 2018.

On the other hand, if you anticipate being the recipient of spousal support, you have a big incentive to put off finalizing your agreement until next year, because the payments will become tax-free to you.

Either way, you should contact a specialist in family law, someone who is experienced in divorce tax issues, to get the best tax results for yourself.  Tax-wise, waiting too long could turn out to be an expensive mistake for years to come.

Lastly, be warned that many otherwise competent divorce lawyers are not up to speed on many of the new tax changes.  So don’t assume that just any family law attorney is capable of guiding you to the best tax results in your divorce.  Do your homework.  Contact a specialist in family law who is up to date on the latest tax changes that might affect you.  Find out who can best represent you regarding your spousal support requirements, and other family law-related issues.

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PRESIDENT TRUMP’S DECEMBER 2017 TAX PLAN ELIMINATES DEDUCTIONS FOR ALIMONY PAYMENTS

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The burden of paying spousal support is about to reverse. That’s because there’s a new tax law called, Tax Cuts and Jobs Act (TCJA), that was passed by Congress in December 2017, that has effectively abolished tax deductions on alimony payments beginning January 1, 2019. Under the new Tax Cuts and Jobs Act, alimony payments will be neither tax deductible for the paying spouse nor taxable in the hands of the recipient spouse.

This new law will apply to payments that are required under divorce or separation instruments that are:

(1) executed after December 31, 2018, or,

(2) modified after that date if the modification specifically states that the TCJA treatments of spousal support payments (not deductible by the payor and not taxable income tax by the recipient) applies forthwith.

This new alimony provision is not retroactive, and it does not apply to divorces and separation orders entered into before 2019.

Until this new law, paying spousal support could be considered a “win-win” situation for both divorcing spouses. The payor receives the benefit of a reduced tax obligation and the payee receives the benefit of more income than might otherwise be forthcoming if the payor spouse wasn’t receiving the benefit of the tax deduction.

This change in law could now prove expensive for individuals who must pay spousal support, because the tax savings normally derived from deducting spousal support payments can be substantial for high-earners. One of the biggest disadvantages of the new tax law is that it could affect the desire of a higher-earning spouse to settle with their dependent spouse, since the deduction acts as a great motivator for the higher wage earner to agree to help support the spouse with less income in the first place.

WINDOW IS STILL OPEN

There is still a window for the payor to receive deductions for spousal support payments, but that window is closing. If you are involved in divorce proceedings, or you are thinking about divorcing, and you want deductible spousal support treatment for some or all of the payments that you will make to your soon-to-be-ex, the TCJA gives you a huge incentive to get your divorce agreement wrapped up and signed by December 31, 2018.

On the other hand, if you anticipate being the recipient of spousal support, you have a big incentive to put off finalizing your agreement until next year, because the payments will become tax-free to you.

Either way, you should contact a specialist in family law, someone who is experienced in divorce tax issues, to get the best tax results for yourself. Tax-wise, waiting too long could turn out to be an expensive mistake for years to come.

Lastly, be warned that many otherwise competent divorce lawyers are not up to speed on many of the new tax changes. So don’t assume that just any family law attorney is capable of guiding you to the best tax results in your divorce. Do your homework. Contact a specialist in family law who is up to date on the latest tax changes that might affect you. Find out who can best represent you regarding your spousal support requirements, and other family law-related issues.

FAMILY LAW COURT ORDER NOT ENOUGH TO ESTOP WIFE FROM SUING EX FOR DOMESTIC VIOLENCE

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If he continuously commits acts of violence against his ex wife, she should be able to go after him with a legal vengeance.  And the California appellate courts agree.  In its wisdom, the Golden State’s highest court has held that despite the fact Wife went after Husband in family law court, and was awarded spousal support, she is not collaterally estopped (prevented) by res judicata from filing a tort action against her former Husband based on his alleged acts of domestic violence against her. In the case of Boblitt v Boblitt (2010) 190 CA4th 603, 118 CR3d 788, Wife, at the couple’s divorce trial, claimed that her Husband had been physically and mentally abusive for decades, from the time before they were married up until after the dissolution was filed.  She further claimed that injuries resulting from the abuse had impaired her ability to work. The trial judge indicated that he considered her allegations in reviewing the factors set forth in Family Code §4320 affecting spousal support and stated in his statement of decision that he had trouble with Wife’s credibility relating to some of the alleged incidents.  The family court judge then went on to state that, although Wife had also requested she be repaid for “past medical bills, future medical bills, counseling and alleged pain and suffering,” he felt her spousal support award was appropriate.  When a judgment on reserved issues was entered in the family law court, the wife requested reconsideration and then, when that was unsuccessful, appealed the judgment. In a civil action, Wife later sued Husband for damages based on domestic violence, assault and battery, and negligent and intentional infliction of emotional distress, as well as other causes of action.  Husband moved for judgment on the pleadings, claiming that all of Wife’s claims had been or could have been tried in the family law case and that the family law court had denied Wife most of the relief she had requested there. Wife opposed Husband’s motion, first by arguing that the family law judgment, being on appeal, was not a final judgment, and second, by arguing that the domestic violence cause of action was “not tried in the dissolution action.”  The trial court in the tort action granted Husband’s motion based on collateral estoppel or res judicata. The appellate court reversed.  It found Wife to be correct on both counts in her tort action.  The panel pointed out that even had the family law judgment on reserved issues been final, Wife’s second argument remained valid.  The appellate court found that Wife’s tort action was based on “the primary right to be free from personal injury,” while the right to spousal support from a former spouse was based on the trial court’s consideration of numerous factors, one of which is a history of domestic violence.  Also, the family law judge’s failure to award Wife some of the relief she requested, such as for past and future medical bills, counseling, and alleged pain and suffering, did not have a preclusive effect, because that judge had no power to award such relief in a divorce case.

NO ERR TO BASE SUPPORT ORDERS ON REASONABLY REDUCED WORK SCHEDULE BASED ON CHILD’S BEST INTERESTS

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An important case has recently been handed down by California’s appellate courts that stated that the trial court in a family law matter did not err by basing its support orders on Wife’s 80% work schedule where that percentage constituted objectively reasonable work regimen and was in Child’s best interests.  The facts of In re Marriage of Lim and Carrasco are as follows:

The couple was married in 2003, and later they had two children.  During the marriage, Husband was a college professor and Wife was a partner in a law firm.  They separated in 2011 and Husband filed for divorce later that year.  Husband dismissed his petition three (3) days later, and they attempted to reconcile.  Having failed their reconciliation, one month later Wife filed for divorce.

Husband filed an ex parte request seeking custody of the children, child support, visitation, and temporary spousal support.  In his supporting declaration, Husband stated that his flexible work schedule allowed him more time to care for the two children, while Wife’s burden of billable hours required her to work longer hours.

In her responsive declaration, Wife agreed to pay guideline child support based on her recently adopted 80% work schedule.  At the conclusion of the hearing, the family law trial court found that Wife’s reduced working schedule would still involve “working a substantial amount of the time” and that the 80% schedule would be in the children’s best interests.

Accordingly, the trial court determined that child support should be based on Wife’s actual income under that schedule.  In findings and order after hearing, the trial court further found that child support and spousal support should be calculated per Wife’s reduced schedule income.  Husband claimed the trial court should have calculated support based on Wife’s full-time earning capacity and erred by deviating from the guideline, and he appealed.  But CA-6 affirmed the trial court’s decision.