Dave –
I was talking this through with a friend over the weekend and we came to the same conclusions as you. Obviously it's rough numbers, but gives us something to work with.
In addition, to deal with the uncertainty, I will be proposing in a current negotiation, that passage of this monstrosity (as you so aptly named it!) would be a substantial change of circumstances giving rise to a modification of alimony.
C. Megan Oltman
Oltman Law & Mediation
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Original Message------
I think the issue of how we'd handle the change got lost in the discussion about the effective date of the impending tax "reform" monstrosity.
I think we'd find the midway point between what alimony would've cost that payor after deductibility and what the recipient would've benefited after paying taxes on it.
For example, I have a case right now in mediation where we're discussing an obligation of $2700 per month. Instead of $2700 per month, we'd reach a midway point between the approximate amount that would have cost him after deducting it ($1,850ish) and what she would've benefited after paying taxes on it ($2,100ish) - $2,000? The problem, of course, is that we're using "rough numbers", guesstimating what the tax benefit (33-35% of amount paid) and tax hit (20-25%) are to both parties.
Is that the outline of how others will approach the issue?
And, as far as a rule of thumb, removing the deductibility / income:
Old rule of thumb:
<x-tab> </x-tab>100,000 payor income
<x-tab> </x-tab> 40,000 payee income
<x-tab> </x-tab>------------
<x-tab> </x-tab> 60,000 difference
<x-tab> </x-tab> 20,000 1/3 difference
<x-tab> </x-tab> Payor deducts 20,000, so cost is $13,400
<x-tab> </x-tab> Payee claims 20,000, so benefit is $15,600
<x-tab> </x-tab> $14,500 is midpoint (13,400 + 15,600 = 29,0000 / 2)
So a new "rule of thumb" would be 15% of payor's gross income?
Thoughts?
<x-sigsep></x-sigsep> David Perry Davis, Esq.
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