NJSBA Family Law Section

It appears that the alimony deduction would be eliminated under this bill for all agreements reached after November 1, 2017 - which could be a moving target.  All prior deals would stand, which makes no sense for IRS reviewers, other than if you deducted in 2016, you can deduct going into the future - but honestly - they are going to review that?

Also, this makes it impossible, in my view, to settle or try any case from now until either passage and enactment of a tax reform measure or what might look like a permanent abandonment of the effort.  We simply don't know what they will do.

My final question on this is how can the tax code treat one tax payer so differently from another simply based on the date of the marital settlement agreement.  Alimony is an obligation of state law and there is a wealth of tax court law that gives deference to the tax treatment or intent of state law and state judgment obligations.  I can't see this effort to save money on the backs of individuals in order to fund the permanent elimination of the estate tax and the permanent reduction of the corporate tax to be fair or possibly constitutional  - they could have just said all alimony payments under X dollars per year remain deductible and any portion above is no longer deductible - but, gosh, that would mean only wealthier people would get the hit...

I agree with Deb. If the idea is to "simplify the tax code," they just complicated the tax law, as it will likely result in lots of tax court litigation. If the idea is to increase tax (presumably to give a higher tax break to the wealthy and corporations) it will not go far to accomplish that, but will merely shift who pays the tax. Badly thought through.

C. Megan Oltman

Oltman Law & Mediation

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I appreciate your referrals!

I have that exact issue right now – they are waiting for January / February, due to joint tax return one final time. I am hoping that if agreement signed by parties already, results would be respected, but my guess this will need to be clarified within a modified bill or litigated, and depending on the results of litigated, my guess if I have 1 client with this game plan, and I am a solo, there will be 100s of modification filings in the coming 6-12 months.

Gerri,

  It may not be that simple.

  Please remember that all tax brackets are marginal tax brackets. That is, if you are in the 25% bracket your next dollar is taxed at 25%. But much of your income is taxed at lower rates, especially if you are broadly defined as "middle class."

  To map the "1/3 of the difference between incomes" to new tax rules would require picking apart tax effects at each bracket and then adding them up-for both parties.

  Perhaps it's time to jettison the "1/3 of the difference between incomes" fake guideline and go back to basics, i.e. the factors identified in the alimony law for need and ability to pay.

Ed

* * *

Edward J. Zohn, Attorney at Law

Zohn & Zohn, LLP; 7 Mount Bethel Road, Warren NJ 07059

908.791.0312 office; 908.428.7988 direct; 908.660.4866 fax

"Leges sine moribus vanae" (Laws without morals are useless) - U. of Penna. Motto

www.zohnlaw.com