Proposed Tax Plan Would Hurt Divorced Families
According to The Wall Street Journal reporter, Laura Saunders, the proposed Tax Plan will make being divorced even more costly and will have a direct impact on custodial parents and their children. The new bill proposed by the House would eliminate the existing tax deduction that payors of maintenance receive. According to existing law, when a higher earning former spouse pays maintenance to the lower earning former spouse, the payor receives a tax deduction and the recipient pays taxes based on a lower tax bracket. This tax benefit helps to soften the blow to divorcing couples who will lose the deduction available to married couples and thus levels the playing field to a certain extent for divorced families already struggling to support two households. According to Ms. Saunders, the maintenance deduction helps to encourage more generous divorce settlements and directly benefits the lower earning spouse. Ms. Saunders further surmises that eliminating this incentive will mean smaller lump sum payouts to lower earning spouses who are frequently women and custodial parents.