As 2018 winds down, some residents of California and other parts of the country are anticipating how part of the Tax Cuts and Jobs Act will affect them in the new year. For those couples who are planning to divorce in 2019, there is a new law taking effect on Jan. 1 that changes the way alimony is handled for tax purposes. Some matrimonial experts believe these changes will make divorce deliberations more complicated.
Currently, alimony is tax deductible for one paying it, and the person receiving it pays taxes on it. The new law reverses this by taking away the deduction for the payer and the tax burden for the receiver. This change will reportedly provide almost $7 billion to the government over the next decade. However, it will likely create more contention in divorce talks as the spouse slated to pay alimony will fight for lower amounts.
If a divorce is finalized before Dec. 31, 2018, it will be grandfathered in with existing law. However, any modifications made must specify that the old rules apply. Likewise, any marital agreements, such as prenups, should be carefully reviewed by a financial expert. Changes were also made in 2017 to eliminate the child tax exemption, although the tax credit was doubled.
It is helpful to seek the guidance of a California divorce attorney when addressing the issue of alimony or any other issue that arises when a couple decides to end their marriage. An experienced lawyer will safeguard a client's best interests at every stage of the proceedings. While going through a divorce can be a worrisome event, having a knowledgeable advocate working on one's behalf can greatly ease that stress.