Contemplating divorce? Post-reform taxes deserve consideration
Jul 5 2018 - Posted by On Behalf of the Lincoln Law Firm, PPLC, in Divorce, Tagged in Divorce, Taxes
When making a major decision, it’s a bad idea to do it under pressure. That goes for making major purchases in your life, or ending relationships with significant others. You face decisions about your past and your future, and in some instances the future of children.
Financial aspects of the dissolution may seem the driest of issues to wade through because of the accounting involved, but they are also among the most important because of the implications they have on your future and that of your family.
In the wake of tax reforms enacted in 2017, some Texas couples contemplating divorce may be feeling a sense of urgency to act, even if they don’t feel they’re completely ready. It’s at such times that consulting an experienced attorney becomes important. You want to be confident that you’re making decisions from a well-informed position.
Tax reform brings a new pressure point to the decision-making process for many because of a change in how alimony, spousal support, is handled on tax returns. Under the law, any support payments finalized or modified after Dec. 31, 2018, won’t be subject to a tax break. Payers of support who previously could deduct support payments from their taxes won’t be able to after Dec. 31.
In the view of many tax and divorce analysts, the loss of this benefit raises particular concerns for divorcing couples in which one spouse earns a significantly larger income than the other.
Under the passing regime, higher income spouses have often been willing to pay more in support because they could deduct the payments on their taxes. Observers say loss of that benefit under the new regime could prompt better-heeled ex-spouses to press for lower alimony obligations to the potential detriment of the recipient spouse’s financial security.
And since recipient spouses tend to be women, there’s fear among some that the reform will hurt women disproportionately.
Law changes always affect legal processes such as divorce. The extent to which they affect your situation depends on knowing your options so you can protect your rights and needs to the greatest extent possible.
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