Many people with high-paying jobs, such as those in the technology sector, must think about the financial consequences of divorce.
For example, the new Tax Cuts and Jobs Act reverses existing legislation concerning alimony payments. If you are about to end your marriage, how will this affect you and your soon-to-be ex-spouse?
The law that stood for 77 years allowed the party paying spousal support to take a tax deduction while the party receiving the alimony payment had to pay tax on it. Now that the new law is in effect, the payer can no longer claim a tax deduction and the payee no longer has to pay tax on the amount he or she receives each month. However, in the absence of a tax deduction, less money may be going to the payee. In fact, some spouses may balk at having to pay any alimony at all, a stance that could also impact payments for child support.
Temporary spousal maintenance
In the state of Washington, the court does not look kindly on permanent spousal maintenance. It favors the concept of temporary spousal maintenance because the amount determined is based on the needs of the payee. For example, a payee who left the workforce to raise the children would receive alimony until such time as he or she is able to find a job and become self-sufficient.
Calculating divorce expenses
If the higher-earning spouse elects not to pay alimony, the divorce could become contentious and the parties bitter. The average cost for couples who opt for traditional litigation is more than $19,000. A faster, less stressful and more economical solution is a collaborative process with average costs coming in at $14,500 per couple. Of course, sometimes alimony is not a consideration in a divorce, but if it is, couples should become educated about the new tax law and the effect it will have on their financial future.