Couples that are considering getting a divorce may want to finalize things before the end of 2018. And with new tax laws that have recently been enacted, many may do just that, possibly making 2018 the year of the divorce. There are four new tax laws that will impact a family’s finances after any divorce that is finalized on or after New Year’s Day 2019.
The most talked-about new tax law affects alimony payments that were once tax-deductible by the spouse making the payments. While Texas law does not provide for alimony, in certain cases spouses may be entitled to spousal maintenance, which is treated as alimony for tax purposes.
While spousal maintenance payments have previously been claimed as income by the spouse receiving the payments, that spouse typically fell in a lower income tax bracket, so the total taxes on alimony were lower than if the payor spouse had claimed the same income.
That will change in 2019. As of January 1, spouses paying spousal maintenance payments will have to claim those amounts as income. That will not only hurt the person paying maintenance, but also the person receiving it, as they may face lower maintenance payments to make up for the increased tax cost.
The division of assets has also been affected by new tax laws. As of the new year, the amount of interest on mortgage payments and the amount of property taxes that can be deducted on tax returns will be reduced. This will make home ownership more expensive.
To make matters worse, those who sell a home while married can make a profit up to $500,000 without tax penalties. Single individuals can only realize half of that, up to $250,000. Those who will not be able to afford a home after divorce may wish to sell it before their divorce is finalized, depending on the anticipated net profit.
When children are involved in a divorce case, it always makes things much more difficult. The new tax laws have not helped here, either. The new code strikes out the exemption rule for children during the years 2018 — 2025.
While this will be true for any parent that claims children on their tax returns, that parent may also be eligible for new child tax credits in the new year. As of 2026, the exemption will revert to $4,000+ allowed per child.
Finally, the new tax laws also affect those who have already divorced or are considering it and also have pre-nuptial or post-nuptial agreements. The new laws may have nullified some of the arrangements outlined in these contracts, meaning couples that hold them should review them with a family lawyer that can explain what will and will not stand when the new tax laws come into play.
“It is important that any couple serious about divorce finalize the proceeding before 2019,” says Sharon Ramage of The Ramage Law Group. As there is a 60 day waiting period, it is important that couples wishing to finalize divorce during 2018, file before October 15, 2018. “While this may sadly make 2018 the year of divorce, acting now can potentially save families thousands of dollars down the road.”
Did you know the Arlington Public Library lets you borrow free energy efficiency tools? The latest Rethink Energy shares the details.
President Joe Biden paid a visit to Arlington and the recently-renovated Lubber Run Park, in support of Democrat Terry McAuliffe’s Virginia gubernatorial bid.
With one month to go before school starts, parents are being urged to enroll their kids in some Arlington public schools amid a continued drop in enrollment. Screenshots and emails…
When Marjorie Tarantino was closing on the purchase of her townhouse this spring, she learned there were problems with the deck. Tarantino had bought a property in the Richard Bassett…