The new tax law goes into effect on January 1, 2019 which will have a significant impact on divorcing couples.
There are now tax benefit changes to alimony, the family home and child tax credits. Below are a few highlights of this new change and how it will financially affect divorcing couples in 2019.
§ Starting on January 1, 2019, the payor will no longer be able to deduct alimony payments, likewise the payee will no longer be required to report it as income. It is likely that alimony will become more and more obsolete as the benefit to the payor has been abolished. If a settlement was reached before 2019 and is being amended or modified, we will have to wait on guidelines from the IRS to determine if the new rule will apply under such circumstances.
§ The marital residence will also become "more expensive" under this new tax law, given the limitations on the allowable deductions for the property taxes and mortgage interest the outcome on who keeps the house or if the house has to be sold will certainly be different than in years past. Additionally, tax implications relating to the sale of the home are different for couples vs. singles. Couples may realize up to $500,000 in gain without tax consequence while married but only $250,000 of gain with no tax due if you sell when single, so when a divorce is finalized depending on the facts of the couple's specific circumstances; may affect when they may want to obtain the final decree.
§ Multiple children no longer qualifies the taxpayer for multiple tax deductions for tax years 2018-2025. Parents should still negotiate who will claim the children if they will still be minors once the credit returns in 2026.
If you have any questions about divorce under the new tax guidelines or any questions regarding family law in general, contact the firm's consultation line at (412) 255- 3226 email [email protected]