Will New Tax Laws Complicate Divorce in 2019?
Some are saying that the 2019 tax bill is complicating divorce for women. And they are right. For those whose divorces will be finalized after December 31, 2018, there will be repercussions. The new law makes spousal support (sometimes referred to as alimony) non-tax-deductible for the payer and non-taxable for the recipient. This effectively eliminates the previous tax benefit of larger support payments. This is particularly noticeable in high tax states like California and New York where the deduction in place before the new law took effect could save top earners up to 50% in taxes.
Since women are more often the recipients of alimony or spousal support checks, they are the ones who are most affected by the new tax law. While having support payments not taxed may seem like a good idea, the overall decrease in the amount of alimony paid as a result of the higher taxation on support payers actually ends with less money paid.
If you are getting divorced, taxes are probably not on your mind. But you may find that they have a bigger impact on your wallet now than at any other time in your life. The new tax laws will affect more than half of the population. Called The Tax cuts and Jobs Act, the new law was signed in December 2017, reversing the law introduced 77 years ago that was created to help free up money for divorcing couples and ease their transition from paying their taxes jointly as a married couple to paying them separately.
While leaving divorced individuals with less cash, the new legislation should raise an extra $6.9 billion for the government over the next ten years.
People who are already divorced will be grandfathered in, but if they have any modifications to their agreements in 2019 or later, they could be subject to the new tax law. (The modification may state that it is to be governed by the new rules. If it does, then the new rules apply. If the modification does not include any statements of this nature, then the old rules still apply). Pre and post-nuptial agreements could also be affected by the new tax law and couples should have their agreements reviewed by an attorney in light of the changes.
If you are worried about how the new tax changes could affect you after your divorce, please get in touch with one of the experienced divorce attorneys at The Maggio Law Firm today.
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