Virginia residents who are considering getting a divorce may already be aware that the process can be very expensive. However, the Tax Cuts and Jobs Act could make marital separations that take place after 2018 even more costly.
All taxpayers should understand how certain provisions of the TCJA will affect exemptions, deductions, federal tax rates and Alternative Minimum Tax limits. People who are planning to get divorced soon should be particularly aware of the provisions that impact alimony and child support.
For individuals whose divorces will be finalized in 2019 or later, alimony will no longer have any income tax consequences. Instead, they’ll be treated as a simple transfer of property in accordance to divorce settlement terms. Divorcees will not have to report alimony received as part of their taxable income. On the other hand, those who pay spousal support will not be able to deduct these payments from their total income.
For many divorcees who have had to pay alimony in the past, deducting support payments made the obligation a little more bearable. With the tax law changes, individuals who become divorced in 2019 or later will not be able to enjoy this deduction advantage. However, experts say that courts will take this into account and order lower overall payments to compensate.
A family law attorney may advise a client about how the TCJA will impact their impending divorce. The lawyer might consider the factors of a client’s divorce and advise whether it may be more beneficial to finalize the separation before the tax law changes become effective.