781.708.4445

wmlevine@levinedisputeresolution.com

Divorce Mediation Blog

Bullish on Alimony 2: “After” the Fiscal Cliff

Wednesday, January 02, 2013

Working people turned out the lights on New Year’s night with the U.S. House of Representatives scrambling to avoid blame for a January 2d bear market. As we slept, House Republicans swallowed their hubris for a day, approved the latest federal tax fix (sort of); and they solemnly vowed to fight another day.

As we slept, present and future alimony payers in the “the 1.5 per cent” cohort (those with income above $400,000.00 per year or $450,000.00 for joint tax filers) gained 4.6 points in the value of their spousal support “tax shelter”. As we suggested in an earlier blog entry, this 13.1 per cent increase in the value of the high earner’s tax deduction is the result of the increase in top marginal tax rate from 35 to 39.6 per cent, now a reality.

But, didn’t the Congress resume the Bush era high-income itemized deduction phasedowns, negating this ironic windfall? The answer is “yes”, deduction limits did resume for taxpayers above $250,000.00 (according to media reports); yet it does not matter for alimony payers, because the alimony deduction is actually not a deduction at all, but is, rather, an “adjustment” to income. As such, the alimony deduction is not subject, so far as we know, to the phasedown provisions at all. All 2013 payers can continue to claim adjustment for all alimony paid.

At the same time, while the federal government increased its alimony subsidy for high-end alimony payers (small comfort perhaps in view of the overall tax hike), only the very few alimony recipients who have incomes above $400,000.00 will face any corresponding increase in alimony taxes. To be sure, more alimony dollars received may become subject to taxation for those payees with overall income above $250,000.00 by reason of reduced access to itemized deductions, but the number of taxpayers fitting this description is few indeed.

To most, this is a minor facet of the latest tax act, given the limited number of dollars lost to the treasury. We do wonder, though, if this change of tax balance between payers and payees will impact modification of old alimony orders. Will it affect alimony deals to be negotiated in the future? Given the number of moving parts on high-end parties’ tax returns, only time will tell.



Get e-mail notifications of new blog posts! Enter email address below.:



Delivered by FeedBurner

other articles


recent posts


tags

self-adjusting alimony mediators traditional negotiations child support divorce lawyers divorce and family law arbitrators alimony law divorce arbitration dispute resolution mediations LDRC separation lawyer The Seven Sins of Alimony Massachusetts divorce mediators lawyer-attended mediation high-risk methodology alimony resolve disputes health coverage support orders disputes divorce mediations Matrimonial Arbitration SJC DOMA MLB labor agreement facilitated negotiations med-arb divorce judgment pre-ARA alimony family law arbitrators alimony reform legislation IRC §2704 Massachusetts divorce lawyers divorced conciliation alimony orders how baseball arbitration works Massachusetts Alimony Reform Act med/arb Massachusetts alimony Self-adjusting alimony orders family law arbitrator Child Support Guidelines Baseball Arbitration Boston Baseball divorce agreement Alimony Reform Act divorce arbitrators Divorce Agreements Family Law Arbitration family law Levine Dispute Resolutions mediation Defense of Marriage Act divorce arbitrator family law mediation Massachusetts lawyers Obamacare arbitrator Massachusetts alimony and child support Uniform Arbitration Act divorce mediator family support alimony statute divorce mediation divorce litigation Massachusetts fraud Massachusetts Lawyers Weekly Same Sex Marriage family and probate law disputes divorce process special master Major League Baseball Arbitration Levine Dispute Resolution annulment Cohabitation Act Reforming Alimony in the Commonwealth Baseball Players General term alimony health insurance litigation Levine Dispute Resolution Center arbitration mediator family mediation Chouteau Levine rehabilitative alimony divorce mediators Divorce COLA divorce and family law mediators Levine Dispute Resolution Center LLC private dispute resolution medical benefits lawyers