Will the tax code changes impact child support?

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Re: Will the tax code changes impact child support?

Unread postby a dad » Mon Dec 18, 2017 11:27 pm

Yet you continue to.
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Re: Will the tax code changes impact child support?

Unread postby Fatheroffour » Tue Dec 19, 2017 7:12 am

It's a tax increase, being sold as a tax cut and being bought by the gullible.
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Re: Will the tax code changes impact child support?

Unread postby RC611V » Wed Dec 20, 2017 12:46 pm

I really want to hear the 'truth' on this.

I'm an Angeleno. Don't need to say more about the slant of my philosophies and the opinions I hear. But I seek out the 'other side' and I haven't been able to find much, honestly, that isn't like obvious BS.

But a calculator I used somewhere told me I'll get a tax cut. But I do pay alimoney, a little. And I don't get to claim any of my 4 kids, so I file single. I think I might get screwed. One thing I'll pay less, another thing said I'll pay a lot more. I'm worried kinda 'cause I adjusted my paycheck deductions but I'm not sure I've paid enough through the year anyway.

So... does anybody have a good source of 'the truth'?
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Re: Will the tax code changes impact child support?

Unread postby Fatheroffour » Wed Dec 20, 2017 1:19 pm

IMO, the truth is what you experience. All else is suspect.

So.... You'll know the truth after the fact, not before.
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Re: Will the tax code changes impact child support?

Unread postby floodland » Wed Dec 20, 2017 2:26 pm

Since child support cannot be changed retroactively, I have my attorney looking into it as I want to get the modification in as soon as possible in the new year. California is the highest taxed state in the US, so losing the state tax write off has a big impact.
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Re: Will the tax code changes impact child support?

Unread postby RC611V » Wed Dec 20, 2017 2:44 pm

Yeah I'm like scared. I've been paying alot of support for like 8 years, ex hardly working and other factors. This year things at work changed a bit, support finally got modified to a reasonable number, and next year some of my expenses are dropping. But FML maybe it'll all get effed anyway with the new taxes.

... or maybe I'll get a tax break. That's one story I'm hearing.

But yeah I'll only know when I know.
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Re: Will the tax code changes impact child support?

Unread postby TJinCA » Wed Dec 20, 2017 3:20 pm

Some of the effects of the new law should start showing up around February, assuming the IRS issues guidance on withholding to employers in January as they typically do. Assuming you don't change your W-4 number the amount withheld from each paycheck may go up or down based on the new 2018 brackets and that would be a pretty good indicator of whether you're getting a hike or a cut.

For me, I'm in CA, make pretty decent money and between by property tax and state income tax I'm still well below the $10K SALT deductibility cap so I'm all good. My spousal support should still be deductible to me since my original order was in 2014, but between spousal support and mortgage interest I'll still probably want to itemize for 2018 even with the higher standard deduction. I think the only real changes for me will be loss of deductibility of HELOC interest and whatever effect the new brackets have--I'm guessing that will be close to a wash but we'll see. I think the main upcoming financial impact for me will be (hopefully) a substantial reduction in spousal support when we finally go to trial in March.

I'm of the opinion that for most individuals, especially wage employees in the middle class, the impacts of the new tax law on their individual taxes will be minor (although I'll admit I don't know this, and that certainly won't be true for some individuals). The real question is what the corporate tax changes will do to the economy, and I have no idea which way that will swing. But we should have a reasonable idea by November 2018 and certainly by November 2020, and be in a position to vote accordingly.
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Re: Will the tax code changes impact child support?

Unread postby dad2grls » Wed Dec 20, 2017 7:27 pm

quantum wrote:I think it's a wash. If your tax obligation goes up, CS reduces and viceversa


Not sure where you get that from? It's my understanding that alimony payments are subtracted from gross income when determining income for child support purposes. Nowhere does a CS formula take into account the tax savings enjoyed by the payor. From what I've been reading, the courts are expected to adjust alimony payments downward to compensate for the tax code differences but it will still complicate divorces and run up the legal fees, at least until it's more established. I could see my ex back during my divorce saying "No way am I going to settle for less alimony just because of the tax law changing!". No doubt it's going to make settlements more difficult, and no matter what there will be less money to go around because the government is no longer a "silent contributing partner".

Also because of the loss of the alimony deduction the payor may be penalized in another way- they may be moved into a higher tax bracket and pay higher taxes on whatever amount is subject to the higher tax rate.

Even if the courts were to say "Ok this poor sap is losing a tax deduction on the spousal support due to the new GOP tax law", and the judge goes so far as to calculate the lost tax savings into CS formulas, it's not an even wash.

I ran the CS formula (NY State) based on 23% of after tax income (2 children) for a guy making $100k gross income and paying 30% in federal income tax. In this scenario he would lose a $9000 tax break and if that is subtracted from his net income and used in CS calculations, the child support drops by about $5k but since the increased taxes are $9k, dad will be paying $4k more per year.

I went back and ran it on my numbers from my divorce, I earn considerably more than the $100k scenario above, and if I was getting divorced in 2018, and by some miracle given the courtesy of a CS break by a sympathetic judge because of my lost tax savings, I would be paying $16,800 more in Federal taxes but only seeing a $4000 break in CS based on the CS formula being applied to a net income that is $16,800 less than it was before.

You can see that in ANY scenario, the CS decrease is MUCH less than the federal tax increase.

TJinCA wrote: I would assume that spousal support agreements going forward would be negotiated with the understanding that it would now be taxable to the payer and not to the receiver--so the "appropriate" amount of spousal support as determined by a judge assessing the various factors would be lower than it would be if the receiver was paying the tax.


In my state (NY) spousal and child support is now determined by a formula (although there's always some discretion especially with spousal support). The states that use a formula would have to step up and make changes to account for the new tax laws and/or the judge would have to figure it out on their own. I wonder when and if they'll get around to doing that.
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