Amazon CEO Jeff Bezos and his wife MacKenzie announced their intention to divorce on Wednesday after 25 years – in what coulld be the highest-profile divorce under a set of new tax changes triggered by the Tax Cuts and Jobs Act.
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The new rules took effect for all divorces finalized on, or after, Jan. 1 and dictate what payments can be deducted on tax filings.
Under the previous statute, the higher-earning spouse could deduct alimony payments on his or her tax filings. The recipient included the payments as part of his or her taxable gross income. For divorces finalized in 2019 and after, alimony payments will no longer be a deductible expense for the payer, which is expected to have financial ramifications.
Typically, in a divorce where children are involved – Jeff and MacKenzie Bezos have four children between the ages of 13 and 18 – the payer would also split support payments between alimony and child support, putting more into the former to claim the tax credit. Now, there is more incentive to allocate more money toward child support and less toward alimony.
“It’s possible that [MacKenzie Bezos] may not get a lot of alimony if she gets a lot of assets,” Emily Pollock, a partner specializing in matrimonial and family law at Kasowitz Benson Torres, told FOX Business.
Other new tax changes that have taken effect include the elimination of exemptions for dependents, which have been replaced – so to speak – with the child tax credit. That may prove to be a worse deal for parents because the exemption acts as a flat-out deduction while a credit goes up against the taxes you have to pay. Further, the threshold for the exemption was higher than what the credit provides.
However, the pair likely has a number of more pressing issues to be concerned about. TMZ reported on Thursday that the couple has no prenuptial agreement – which means assets – including Jeff Bezos’ stake in Amazon – may be subject to be divided evenly between the pair. However, the split is believed to be amicable, which could limit disagreement.