Couples who are considering divorce may have another factor to weigh when making their decision: the most recent tax law. Changes in the tax code that are scheduled to go into effect in 2019 could significantly impact divorce settlements, especially when it comes to alimony, child tax credits, and itemized deductions.
If you are considering filing for divorce or have questions about how tax law changes could affect your existing arrangements with an ex-spouse, it is a good idea to consult a knowledgeable divorce attorney who understands the changes that are coming due to the Tax Cuts and Jobs Act.
While it may seem strange, some believe that the changes in the laws could lead to a “surge in married couples calling it quits” during this year to avoid the consequences of the tax law for divorces that take place after December 31.
What’s behind this declaration? Many divorce attorneys say that the Tax Cuts and Jobs Act’s removal of the 76-year-old deduction that allows U.S. taxpayers to deduct alimony payments starting in 2019 may be a motivating factor for couples considering divorce. In fact, the former chairwoman of the American Bar Association’s family law section, Mary Vidas, says “Now’s not the time to wait … if you’re going to get a divorce, get it now,” according to The Week.
Only time will tell if 2018 will see a surge in the number of divorces. It is true, however, that lawyers and experts on family law are working to understand how this new tax law will affect divorce settlements. It is also unclear whether existing alimony agreements that are modified in 2019 will have to follow the new tax rules.
Alimony has traditionally been deductible by the ex-spouse who pays it, while the recipient ex-spouse had to pay income tax on the amount received. That changes under the new law. In divorces that take place after December 31, 2018, the payer will no longer be able to deduct alimony payments, and the recipient will not have to pay taxes on the alimony received.
This could have a significant impact on calculations when determining alimony amounts. Some commentators believe the elimination of the alimony deduction could make divorce too costly for some couples.
The new tax law also affects the tax ramifications of child custody. The custodial parent who is allowed to claim the dependent exemption will see a significant increase in the amount they can claim. The Tax Cuts and Jobs Act raises the child tax credit from $1,000 to $2,000.
If you are considering a divorce and are concerned about the financial implications of the new tax law, contact the Huntsville divorce attorneys of New Beginnings Family Law. We know that this is a challenging time for you and you likely have questions about your rights, finances, and legal options. Let our team of experienced, knowledgeable, and compassionate divorce attorneys guide you through the process and help you get a fresh start.
Contact us online or by phone today to learn more about your legal rights and options.
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