If you are going through a divorce, there are several tax implications if you finalize it next year. Signed into law last December, the Tax Cuts and Jobs Act reverses the law that was introduced nearly a century ago, which freed up more money for those going through a divorce and making the transition from paying separate taxes—instead of jointly—much easier. This new legislation will result in an increase of $6.9 billion over the next 10 years for the federal government, which means less money for those who get divorced.
Take a closer look at how the new tax law reshapes U.S divorces:
- Changes in alimony – According to current laws, spousal support payments are taxable to the receiving spouse and deductible by the paying spouse. The low tax rate for the recipient spouse and the high deduction rate for the payor can save the family unit thousands of dollars. But when the New Year arrives, alimony will not be taxable by the supported spouse and deductible by the payor, which will most likely lead to less alimony being paid to the receiving spouse.
- Changes in family home tax benefits – If you or your spouse plan on keeping the family home after divorce, the new law has reduced deductibles on property taxes and mortgage interest, which makes it more costly to own a home if you become single
- Changes to the dependency exemption for dependent children – Beginning with Tax Year 2018 (April 2019 is tax return due date) and ending with Tax Year 2025 (April 2026 is tax return due date), parents do not get a multiplier of children as a tax deduction.
As you can see, the tax law can make obtaining a divorce settlement much more difficult due to the added obstacles for spouses to overcome. If you wish to finalize your divorce before the first day of 2019 arrives, contact our Chesterfield divorce attorney at Galmiche Law Firm PC and schedule a free consultation today.