The new tax bill has many individuals and families wondering how their bottom lines will change. When it comes to divorced and divorcing couples, the tax bill will have enormous ramifications.
One of the ways that the tax bill raises revenue to compensate for the tax cuts is through alimony. Under the 2018 tax law, alimony paid by one spouse to another will no longer be tax deductible. The spouse that is receiving the alimony will no longer need to pay any taxes on it. During the 2017 tax year, the situation was the opposite, with the alimony payer deducting the amount from their taxes and the alimony recipient paying 15% taxes on the sum. The alimony changes will not take full effect until 2019, but it does put pressure on those planning to obtain a divorce.
While the process of divorce won’t be changing, the alimony tax changes may lead to more conflicts in the divorce process. Because the spouse who will be paying the alimony will have an increased financial burden, it will make amicable settlements much more difficult between parties. There may also be numerous additional complications as a result of the alimony tax change, as calculating child support payments and asset division might not be so cut and dry.
An Increase in the Child Tax Credit
The child tax credit will be doubled from $1,000 to $2,000. Underneath the 2018 tax bill, $1,400 of the tax credit will also be refundable. This is a big deal for many families, as they will be able to claim up to $1,400 of their credit even if they do not owe any taxes. That being said, keep in mind that the child tax credit is adjusted by income. Many families will not notice much of a difference to their bottom lines.
How Can I Learn More About the Effect of the 2018 Tax Bill on My Family Law Case?
To learn about how the 2018 tax bill will affect your alimony payments or divorce proceedings, give us a call at Lebovitz Law. We have years of experience negotiating the best deals for our clients, whether it’s family law or property law. Contact us today.