Handling the financial side of divorce can be a difficult task. The recent divorce tax changes that are going into effect this year have now changed some key pieces of divorce financials around. Proper understanding of these new laws is key to help reduce the stress they might bring…
Divorce Tax Changes: What To Know
Alimony payments used to be tax deductible for the person paying before these new divorce tax changes. These payments were also considered taxable income for the person receiving them. Going into 2019, however, this will no longer be the case.
Due to these changes, alimony disputes could become more involved. Higher-income spouses may want to pay less alimony due to losing the tax deduction. On the other end, spouses may also fight for more alimony due to the money being able to go further. It’s important to keep these changes in mind when discussing potential alimony with your spouse.
If you had a divorce agreement in place before 2019, then the new tax laws won’t affect them. However, any new modifications you make going forward could be impacted by the divorce tax changes. If your modification falls within the new laws, then it will be subject to the new rules. If not, then the old rules still apply. Keep this in mind if you plan on making any potential modifications to an agreement.
Pre- and post-nuptials
Pre- and post-nuptial agreements are also potentially impacted by the new divorce tax changes. However, unlike with standard agreements, these new laws can potentially change or nullify items in these agreements. Make sure to double-check the terms and see if anything will be changed by the new laws.
Dependent tax deductions
Starting in 2019, the $4,050 exemption you could claim for dependents is being removed. In its place, however, is an increase on the child tax credit from $1000 to $2000. This divorce tax change is especially important to keep in mind for couples with children. For single taxpayers, they’ll see an almost doubled standard deduction on their taxes.
The financial side of divorce can be one of the more tricky to navigate. New changes in the law can complicate things even further. Understanding what aspects have changed will help to make sure nothing catches you off guard.