Tax Law Changes
The new tax act passed in 2017 made a number of changes in the tax law that have an impact on divorce.
1. Spousal maintenance (Alimony) payments will not be tax deductible by the person paying and will not be taxable to the person receiving the payments for all divorces entered after December 31, 2018. Divorce decrees entered before January 1, 2019 will not be affected by this change. However, modifications of divorce decrees entered after that date may be affected.
2. The personal tax exemptions have been eliminated, so there is no exemption for dependents.
3. The standard deduction increases in 2018, which means that fewer people will be able to itemize their deductions. The standard deduction for single and married filing separately is $12,000, for head of household is $18,000 and for Married filing jointly is $24,000. These increases may help offset the loss of the personal exemptions for some people. There are also limits to deductions for people who do itemize for state and local income taxes and mortgage interest deductions.
4. The Child Tax Credit increases from $1,000 to $2,000 per child.
5. Tax bracket changes. The tax brackets for the percentage of tax that you will have to pay on your income have been revised. This may have an impact on your taxes for next year, and on how you negotiate your financial divorce. So you need to know the impact of taxes on your situation.
It is important that you understand the impact of the tax law changes on your divorce and financial situation. The only way to be sure that you understand is to talk to your CPA or tax preparer. If you do not have one, then you should consult with one. You should have a copy of your prior year's tax return to be able to get specific advice about your specific situation.
by: Sandra Tedlock