Tax Changes related to divorce will be far reaching from the the new Tax Cuts and Jobs Act (TCJA) applicable going forward.
Below are few areas to talk with your tax professional or attorney about related to the new tax law and your divorce, even if you have been divorced for years.
1. Pre- and post-nuptial agreements may be affected by the tax changes. Depending on how your agreement was written, some tax changes may affect your prenuptial or postnuptial agreements. You can review this with the attorney that prepared your contract.
2. As discussed in our blog posted in September 2018, alimony or spousal support that is paid will no longer be tax-deductible to the payor anymore and alimony received will no longer be taxable income for the recipient.
3. Those whom already have a spousal support agreement and finalized it in their marital settlement agreement with their divorce judgement will be grandfathered in and receive the tax deduction. If you modify your agreements in 2019 or beyond, you could be subject to the new rules, depending on the language in your contract. If you have modified your support agreement, is important to ensure you are able to deduct it correctly and should therefore check with your tax preparer.
4. Children won’t be the tax deduction they used to be. This tax deduction has decreased in its benefit. Therefore, it has become a less significant factor in negotiation in divorce. Your attorney or mediator can assist you with the specifics.