1976, December, Pg. 1790. Changes in the 1976 Tax Reform Act: Domestic Relations.

• Author: by Davis W. Moore, Jr.

5 Colo.Law. 1790

Colorado Lawyer

1976.

1976, December, Pg. 1790.

Changes in the 1976 Tax Reform Act: Domestic Relations

1790Vol. 5, No. 9, Pg. 1790Changes in the 1976 Tax Reform Act: Domestic Relationsby Davis W. Moore, Jr.Davis W. Moore, Jr., Denver, is a partner in the firm of Eagan & Moore.1791The 1976 Tax Reform Act makes three significant changes in federal income tax laws which will directly affect individuals involved in or contemplating dissolution of marriage proceedings.(fn1)

AlimonyThe first such change provides that beginning in 1977, alimony paid by a taxpayer is to be deducted in arriving at the taxpayer's adjusted gross income,(fn2) rather than being an itemized deduction from adjusted gross income as is presently the case. The effect of present law is to give the payor of alimony an income-tax benefit only to the extent that the alimony which he pays, when added to his other itemized deductions during any year, exceeds the amount of the standard deduction to which he is entitled for that year. Under the new law the same taxpayer will be able to deduct the entire amount of the alimony paid and also to take the full amount of the standard deduction in the event his other itemized deductions do not exceed the amount of his standard deduction.

Child CareThe second major change concerns the income tax treatment of certain child-care expenses. Under present law a working custodian-parent of one or more dependent children is allowed an itemized deduction of up to $4,800 per year for qualifying child-care expenses, but the deductible amount is reduced by one-half of the taxpayer's adjusted gross income in excess of $35,000 ($18,000 prior to March 30, 1975). Beginning in 1976, the child-care deduction is abolished and replaced by a non-refundable credit against a taxpayer's tax liability. The new credit is to be 20 percent of all "employment-related expenses" paid by the taxpayer for child care up to a maximum of $2,000 per year of qualifying expenses for one dependent child and $4,000 per year of qualifying expenses for two or more dependent children, regardless of the amount of the taxpayer's adjusted gross income. In cases involving divorced parents, a dependent child is defined as a child (a) who is either under the age of 15 or who is physically or mentally incapable of caring for himself, and (b) who during...