It’s already January 2018, and a number of divorce complaints are already in the works. You should know that it’s not exactly an anomaly. Truth be told, January holds the record for the greatest number of divorces filed year after year. Without question, 2018 will not be the exception. In this case, it may be that tax reform is the impetus for early filing.
Traditionally, many families choose to stay together during the holidays. Notwithstanding, the floodgates seem to open in January. In fact, one news article shares that January is unofficially known as “Divorce Month,” Perhaps it’s the idea that the new year represents a time for resolutions. Consequently, starting new means ending the old.
Meanwhile, the thought process may be a bit different in 2018. At the very least, high-income wage earners have their concerns. After all, there is the issue of the new tax code and how it will impact families that split up.
New Tax Laws and Divorce
All things considered, the new tax laws are a consideration for anyone seeking a divorce. If there’s a chance you will be required to pay alimony, you should look to meet with an experienced family law attorney as soon as possible.
Under last year’s tax guidelines, individuals who pay alimony are able to take a deduction for their payments on their federal tax returns. Additionally, those who receive alimony are expected to report it as income. Since taxes are not deducted from spousal support, the payee might find that they owe Uncle Sam as a result of the alimony payments.
For some, this rule will still follow. However, according to the new tax code, the old guidelines only apply if a court order or divorce decree is entered before December 31, 2018. Clearly, there is good cause for someone with prospective alimony obligations to ensure their divorce is finalized by the end of the year.
Going forward, the individual responsible for paying spousal support will not be entitled to the deduction. Likewise, the person receiving alimony payments will no longer need to report it as income. No doubt this may become an issue when negotiating spousal support.
All things considered, this change mirrors how child support payments have been treated under the federal tax code in prior years. Child support continues an unavailable income tax deduction, and recipients do not have to report it as income. However, that’s not to say that there won’t be adjustments to the way child support is calculated. After all, it is based on net income, and the new tax laws change everything.
Modifications to Existing Orders
If there’s a change of circumstances that warrants a modification to an existing court order, that too becomes an issue. The tax code won’t revert back to the original court order. Instead, if alimony is increased or decreased after January 1, 2019, it doesn’t qualify for a tax deduction. This is true even it was eligible for one in prior years.
Likewise, the recipient will not have to claim spousal support if the order is not entered by the end of the year. Therefore, even a reduction in payments might work out for some taxpayers.
Contact Us
The new tax code may well be critical to the timing of your divorce or request to modify an existing alimony agreement. At the Law Offices of Sam Stoia, our practice is solely limited to family law. Contact us for a complimentary appointment to learn your options