News and Commentary

Why You Might Consider a Divorce in 2018 by Scott Montgomery, CLU, ChFC

The Tax Cuts and Jobs Act (TCJA) reforms the U.S. tax code and turns traditional estate planning for couples on its head by changing the way the IRS will treat alimony payments between divorcing couples beginning on Jan. 1, 2019.

Under current law, payments of spousal support are deductible by the payer and taxable as income to the recipient. However, when a couple enters into a divorce or separation agreement after Dec. 31, 2018, the payer will no longer be able to decrease his or her taxable income and claim a tax deduction for alimony payments. Moreover, alimony recipients who are often in a lower tax bracket will no longer bear the burden of paying taxes on those amounts they receive.

This change could result in higher combined tax liabilities, and more of divorcing couples’ money going to the government, until 2026, when this provision is set to expire. It may also make divorce negotiations more difficult in light of other provisions included in the TCJA, including the elimination of the dependent deduction.

With the new law’s treatment of spousal support, it is very possible that high-net worth spouses considering divorce may feel a sense of urgency and expedite their plans to get an agreement finalized in 2018 to take advantage of the tax break available to them under current law.

In light of these new regulations, couples should consult with professional advisors to understand and address what impact it will have on former spouses’ future income and tax liabilities. It may also require married couples to consider implementing different strategies to offset the potentially negative tax impact of the new law. Civility and careful planning may be the best course of action in an already potential difficult situation.

About the Author: Scott Montgomery, CLU, ChFC, is a director with Provenance Wealth Advisors, an Independent Registered Investment Advisor affiliated with Berkowitz Pollack Brant Advisors and Accountants, and a registered representative with Raymond James Financial Services. For more information, call (954) 712-8888 or email info@provweath.com.

Provenance Wealth Advisors (PWA), 515 E. Las Olas Blvd., Ft. Lauderdale, FL 33301 (954) 712-8888.

 Scott Montgomery is a registered representative of and offers securities through Raymond James Financial Services, Inc., Member FINRA/SIPC.

Raymond James is not affiliated with and does not endorse the opinions or services of Berkowitz Pollack Brant Advisors and Accountants. PWA is not a registered broker/dealer and is independent of Raymond James Financial Services. Investment Advisory Services offered through Raymond James Financial Services Advisors, Inc., and Provenance Wealth Advisors.

This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of the advisors of PWA and not necessarily those of Raymond James. You should discuss any tax or legal matters with the appropriate professional. Prior to making an investment decision, please consult with your financial advisor about your individual situation. The information contained in this report has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.


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