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Couples in a high asset divorce must weigh tax issues

On Behalf of | Dec 20, 2018 | High Asset Divorce |

Certain issues in a Colorado divorce must be repeatedly discussed due to time constraints and the vastness of the impact they will have on a couple’s future. One is the tax law that goes into effect on Jan. 1. Because the manner in which divorced couples who are paying alimony are taxed is set to change, it has led to a rush of people trying to complete their divorces before the year is over. Knowing why this is the case might spur people to be more agreeable to complete their divorce before year’s end and it can help them to think about new strategies after the changes are implemented.

The new tax laws by the Trump Administration changes the responsibility for paying tax on alimony from the person getting support to the person paying it. Because the payer generally has more income – based on having been ordered to pay in the first place – this is expected to yield greater tax benefits to the U.S. This has expedited some divorces that might otherwise have been put on hold. Since many disputes between couples are highlighted during the stressful holidays, many divorces start after the new year. The new law and its urgency changed that. Still, there will be people who end their marriage after the new year and the law will be a consideration.

The new law is generally expected to help those who are getting alimony avoid being taxed as they were in the past. However, there might be a legal argument suggesting that since the tax benefits for the paying spouse have been eliminated, that should similarly reduce what they are ordered to pay. This will not only affect people who are embroiled in a high asset divorce, but one of lesser means as well.

Those who were either unaware of the pending changes to the tax law or have run out of time to complete their divorce before year’s end should consider their alternatives. Because divorce is so life-changing and rife for dispute regardless of when the process starts and ends, it is essential to have legal advice. A law firm with a history of assisting people who are moving forward with divorce should be called for a consultation regarding this and any other issue that arises.