If you are interested in filing for
divorce this year, you must consider the new tax laws which are now fully enacted.
Signed into law on December 2017, the Tax Cuts and Jobs Act reverses the
divorce law which was introduced nearly a century ago in order provide
more money for divorcing couples and make the transition from paying taxes
jointly to separately much easier. This new law is designed to raise an
extra $6.9 billion over the next ten years for the federal government—which
means less money for those going through a divorce.
The following are the major changes to divorce starting in 2019:
Alimony is no longer tax deductible for the paying spouse, and the receiving spouse
will not pay tax on it – Alimony was tax deductible for the individual paying it and taxable
income for the receiving spouse for decades. The tax deduction on spousal
support was considered an incentive to allow the higher-earning spouse
to provide more alimony to the lower-earning spouse, which means fewer
taxes paid and more money for the family. Since these payments are no
longer tax deductible, higher-earning spouses will do their best to pay
less alimony, while the lower-earning spouse will fight for as much spousal
maintenance as possible. Furthermore, legal fees paid to lawyers for helping
obtain alimony are no longer tax deductible as well.
Already divorced couples will have their agreements grandfathered in – For those who were able to finalize their divorces before the
new year, the old rules will still apply. However, if you decide to modify
your agreement, any changes could be subject to the new rules.
The new tax changes impact prenuptial and postnuptial agreements – Since most prenuptial and postnuptial agreements consider alimony
to be tax deductible, you may need to review such agreements with a lawyer
or financial consultant to factor in the new tax changes.
The new tax changes also apply to child tax exemptions – The Tax Cuts and Jobs Act got rid of the $4,050 exemption for
each dependent child through 2025. However, the child tax credit doubled—by
increasing it to $2,000 compared to $1,000. Keep in mind, the standard
deduction has nearly doubled as well.
Due to the new laws, you and your spouse must meet with your lawyers and
any financial advisors to determine how will they affect your pending divorce.
For more information about divorce in 2019,
contact our Wellesley divorce attorney at
Barach Law Group LLC and schedule a confidential consultation today.