Divorce Mediation Mediation Education Uncategorized

One Advantage of Non-Deductible Alimony

One Advantage of Non-Tax-Deductible Alimony

For years the ability to deduct alimony payments by a payor to a recipient was a distinct help for American families. Not having to pay income taxes on the payments supporting an ex-spouse tremendously helped especially lower and middle-income families. After President Trump took away this advantage, alimony became a financial hardship for many.

A recent divorce mediation case was a reminder that, at least in some cases, it can be an advantage for at least a short period of time. A wife, returning to the United States from study abroad to provide her with a career, initially had no income, until she could find employment. The couple had definitely decided to divorce while she was away.

In this case, the wife had no friends with extra space to accommodate her for the period of time it might take to secure a job. The obvious and only choice was for her to live with her soon-to-be ex-husband in their “former marital home”.

The couple decided that he would begin to pay her 7.5 years of alimony beginning when she came off from their joint bank account. This alimony would not have been deductible, under the previous deductible alimony tax regulations, if the couple was still living together. Now, under the new tax rules since it is not tax-deductible, although this is a hardship, it provides no difference from the current tax rules, so it is the same hardship as currently prevails under current tax regulations. The wife was able to have income while still living with her former husband.

During the time-period of the divorce mediation, the wife did find employment and negotiated for a considerably increased salary than initially offered. Although the alimony payment decreased, according to the agreement of the couple, the wife was enormously relieved to be gainfully employed.

This advantage is not to say that the alimony regulation should not be returned to its previous status of being tax-deductible, which is the only way some lower and middle-class families are and will be able to survive financially. The advantage is only that alimony payments, while a couple is still living together can afford an ex-spouse more financial autonomy than he or she previously would have had.