Photographer: malerapaso via Getty Images

Why You Don't Have to Rush to Get a Divorce Before 2018

Updated on
  • Tax bill prohibits deduction of alimony starting in 2019
  • Renegotiated settlements may be able to opt out of change

Republican lawmakers are giving unhappy couples just a little more time to try to work out their differences.

The final version of the GOP tax bill includes a controversial provision that would scrap the break divorcees get for paying alimony -- but it will only apply to divorce or separation agreements executed after Dec. 31, 2018. An earlier iteration of the House legislation called for the “divorce penalty” to take effect next year.

Under the revised legislation, taxpayers making alimony payments would no longer be allowed to deduct the payments from their taxable income. Recipients would no longer need to report the benefit as taxable income. Historically, men have paid alimony to women.

Right now, every dollar in alimony reduces the payer’s taxable income by the same amount. Critics have said getting rid of the deduction would not only increase the financial strain of supporting an ex, but could also lead to more legal disputes and deprive the less-well-off party of much-needed income. Any change could also have lasting consequences for child support, which is often calculated in tandem with alimony.

The GOP tax legislation seems to say that settlements renegotiated after Dec. 31, 2018, can include language opting out of the new tax treatment of alimony, according to Manhattan divorce lawyer Michael Stutman.

Still, Stutman said it would be wise for parties to add language in amended settlements saying payments may need to be renegotiated for a more “appropriate allocation” if the tax treatment of the payments is different from what’s expected.

About 800,000 American couples called it quits in 2015, a rate of about a 100 divorces every hour, figures from the National Center for Health Statistics showed. While divorce rates have dropped among younger adults in the past quarter century, those among older married couples have risen, according to the Pew Research Center. For those over 50, divorce rates doubled.

    Before it's here, it's on the Bloomberg Terminal.