3 ms·
This actually is a broken part IMO. I’ve read that it actually just hurts both parties because a judge still must try to maintain an equivalent QOL but since al
by bradenb 6y ago
This actually is a broken part IMO. I’ve read that it actually just hurts both parties because a judge still must try to maintain an equivalent QOL but since alimony is paid from post-tax income now they cannot afford as much so less is taken. Likewise, even though it is tax-free for the recipient, since less is taken they often end up with less.
I can’t remember where I read this but I’ll see if I can track down a source.
- kilburn 6y agoIt makes sense. Income taxes are progressive, which means you pay (percentually) more the more you earn. Let's see an example. Say that the payer earns 120k pre-tax. Now: a) If you tax the recipient the judge orders a 60k/60k split. After the split both parties get taxed for 60k, which lands them on the 22% marginal tax rate bracket. In the end each party effectively pays 11k in taxes, and hence gets 49k post-taxes. b) If you tax the earner they pay taxes first, hitting the 24% tax rate bracket and effectively paying ~29k in taxes. So you spit the remaining 91k and each party gets 45.5k post-taxes. Definitely a lose-lose. [1] https://en.wikipedia.org/wiki/Income_tax_in_the_United_States#Marginal_tax_rates_for_2019 https://en.wikipedia.org/wiki/Income_tax_in_the_United_State...
- valuearb 6y agoI believe the reasoning was a simple tax grab. They saw the deduction as some sort of dodge allowing someone making $200,000 a year and paying $50,000 a year in alimony, to move that $50k in income from a high tax brackets to a low brackets, even though now these are two separate people legally.