Residents in California and all across the nation were given a couple of extra days this year before their federal tax returns for 2017 were due. While some taxpayers file their returns as soon as they receive all the required documentation, others choose to file as late as they can. Although the deadline for filing this year is now past, many individuals are already looking ahead to see how changes in tax laws may affect them. In particular, couples going through a divorce will experience some changes in their tax filings.
For 2017, those making alimony payments to an ex-spouse were allowed to deduct them from their federal taxes. The spouse who receives the alimony payment was required to report the payments in taxable income. These guidelines, which were established around 75 years ago, will remain in effect for 2018 as well.
However, the tax implications will change for any divorce that is finalized after Dec. 31, 2018. At that point, the person making the alimony payments can no longer deduct the amount from his or her taxes. Likewise, the recipient will not be required to report the amount as taxable income.
Any divorces finalized throughout 2018 will be grandfathered under the existing law. It is necessary for all parties involved to understand the tax implications when a divorce is being finalized. Experts predict an increase in divorce filings throughout the year so that couples can take advantage of the current tax provisions.
Discussions about finances in a divorce can often be some of the most contentious ones. To ensure that one’s financial position is protected both currently and for the future, it is important to have a knowledgeable advocate working on one’s behalf. A California attorney will work with clients to seek the most favorable outcome in their divorce proceedings.
Source: wzzm13.com, “Smart Money: Taxes & Divorce“, Rhonda Ross, April 13, 2018