When deciding to dissolve a marriage, most couples are not concerned with issues like the tax-related repercussions that their divorce will have on their family. This is understandable, as dissolving a marriage can be an extremely emotional and stressful process. The reality, however, is that the timing of a divorce can have important implications on a couple’s finances after divorce. For instance, recent changes in the tax code could have a significant effect on alimony agreements in the future. To learn more about how the recent tax changes could affect your own divorce, please do not hesitate to contact one of our dedicated Rolling Meadows divorce attorney for advice.
The Tax Cuts and Jobs Act, which was passed late last year, made a number of changes to how alimony will be treated in 2019. For instance, under current law, former spouses who are required to pay alimony after their divorces can deduct those payments when filing their tax returns. Similarly, any alimony received by a former spouse must be included when calculating that person’s taxable income. However, starting in 2019, this treatment of alimony payments will end, meaning that those who pay alimony will no longer be able to deduct the payments and the receiving party will not have to include the payments as taxable income. Many tax experts anticipate that these changes will result in much lower alimony awards and more prolonged negotiations, as the higher-earning spouse will no longer have the incentive to agree to a larger payment.
Property-Related Tax Benefits
The new tax law could also affect a couple’s decision making when it comes to determining who will retain the family home. This is because, under the new law, the deductibility of property taxes, as well as the amount of a mortgage that qualifies for interest deductions will be significantly reduced. As a result of these changes, it could be much more expensive to own a home, resulting in more couples choosing to sell their property and divide the proceeds before finalizing their divorce.
Personal Tax Exemptions
The new law also made changes to personal exemptions between tax years 2018 and 2025. For instance, under current law, parents can claim an exemption that allows them to subtract $4,150 from their taxable income for each dependent that they claim on their tax return. The new law eliminates this dependent deduction. However, to offset these changes, Congress also increased the maximum child credit to $2,000 per qualifying child, as much as $1,400 of which can count towards a refundable credit.
Schedule a Free Consultation with a Dedicated Rolling Meadows Divorce Attorney Today
If you have questions about how the new tax law could affect your own family and whether you should file and attempt to finalize your own divorce before the end of the year, please contact one of the experienced divorce lawyers at the SAM LAW OFFICE LLC by calling 847-255-9925 or by sending us an online message.