Alimony Affected by New Tax Law?
By eliminating deductions, the new tax law is likely to significantly impact spousal support amounts in Colorado divorce cases.
The breakup of a marriage and the adjustment to living separate and apart from your spouse can have a significant impact on your financial affairs. In complex divorce cases where one spouse has significantly more income or assets than the other, spousal support or alimony is likely to play a major role in these proceedings. Previously, generous tax deductions for the paying spouse often resulted in higher alimony award payments. Under the recently enacted tax laws, these deductions are eliminated. This could have a significant impact on divorce negotiations, resulting in overall smaller divorce settlements.
Determining Alimony In Colorado
Under Section 14-10-114 of the Colorado Revised Statutes, alimony is often a factor in high asset, complex divorce cases. Depending on the situation, spousal support payments may be negotiated through your attorneys or ordered by the judge, on either a temporary or permanent basis. Factors the court is likely to consider when determining the amount of alimony and whether it is warranted include:
- The length of the marriage and the age and health of the spouses;
- Each party’s income and earning potential;
- The lifestyle and manner of living maintained during the marriage;
- Any premarital assets each one possesses;
- Career or education sacrifices made by one party in support of the other or the marriage;
- Any voluntary contributions to the marriage, the mutual assets, or associated businesses;
- The amount of education or career training a spouse may require in order to be self-sufficient.
The Colorado Courts provide a basic support and maintenance calculator, which can be used in determining these amounts. In high asset cases, which are typically more complex, awards may be negotiated which are greater than the guidelines suggest.
How the New Tax Laws Impact Spousal Support Payments
Previously in complex divorce cases, attorney negotiations regarding alimony payments would consider the tax benefits obtained by the paying spouse. The ability to deduct the amount paid in alimony to their ex was often considered an advantage in high assets cases. By providing tax benefits to the paying spouse, it encouraged more generous awards for the one receiving support.
Unfortunately, the recent changes to the tax code have eliminated this deduction, which could have a significant impact moving forward. According to Market Watch, while the new changes are not set to apply until the 2019 tax year, we can expect divorce and spousal support negotiations to become more contentious in the meantime as a result. Without a deduction to motivate former spouses to be generous in alimony offers, clients and their attorneys are likely to spend more time in court, fighting over these issues.
Reach Out to Nicholas Family Law
If you are separated or considering filing for divorce, it is important to understand how new laws and tax regulations could impact your situation. Call or contact Nicholas Family Law online today and request a consultation with our Denver divorce attorney to discuss your case.