Business 792 Views

New U.S. tax law prompting overflow of accelerated divorces as Dec. 31 deadline nears



The new federal tax laws starting Jan. 1 that eliminates the spousal support deduction has caused a huge fuss, as local attorneys and judges are rushing to finalize an overflow of accelerated divorces.

The rush is prompted by the need to beat the Dec. 31 deadline which will allow Americans expecting to pay support to continue to deduct the amount from their taxable income annually.  There’s equally an incentive for those who will get spousal support, as judges are now expected to start awarding smaller payments as of next year—with the lost tax deduction significantly reducing what high earners can afford.

Due to this mutual benefit, the state has witnessed a rush of divorce fillings before June 30, because until at least six months after proceeding have started, divorce cases can’t be finalized.

Quite a number of family law attorneys are now rushing to finalize all divorce cases by Dec. 31 before the new law kicks in—with professionals such as Rees Law Firm divorce lawyers offering to aid clients successfully finalize divorce cases.

With many lawyers now desperate to settle divorce cases, the move is bound to prompt a heap of paperwork at local courthouses.

"Everybody anticipates that come December, the line for judgment day will be around the block because people want to get it done," said Garrison “Bud” Klueck, a family law attorney. “I imagine the courts will be devoting whole groups of court clerks to handle this.”

Officials at the San Diego Superior Court have acknowledged that they expect a significant increase in divorce cases.

“We will take actions needed to process judgments at the end of the year depending on the number coming in,” said court spokeswoman Karen Dalton in a report.

“We don’t have the funds to hire more clerks, so if we need resources, they will have to be shifted from other areas.”

According to Klueck, there was a sharp surge in people filing for divorce during the first half of 2018, with numerous attorneys alerting clients to the impacts of the new Republican tax reform bill shortly after it was approved last December. The bill eliminates many longstanding deductions—including spousal support—in a move to partly counteract large tax breaks for corporations and the rich.

Nonetheless, the increase in divorce filings is more likely to have been even larger if more agreements included spousal support. Currently, only about 20% do, due to many divorcing couples having young children and judges calculate child support before ruling on spousal support. In addition, spousal support is usually a major factor in a divorce, but only if one of the parties earns significantly more than the other.

According to the IRS, about 6,000 people report deductions for alimony payments—significantly outnumbering the number of people taxes on receiving alimony.

"What they decided to do is just wipe the slate clean and no benefit, no tax deduction essentially, no tax deduction, no tax being paid and effectively what they anticipate that's going to do is generate about 6.9 billion dollars," said family attorney Lauren Taylor in a report.