File divorce in 2018 if you don’t want to get trumped by Trump’s new tax laws.
Are you tired of having regular fights with your spouse? Have you lost all your feelings for your husband? If so, then let me remind you that you have only one life, and you should enjoy it as much as possible.
There is no logic behind dragging a dead relation and waste your life. Rather, you can break up with your spouse and start writing a new chapter of your life. Think logically please!
Yes, you guessed it right. I’m talking about divorce, which is little messy and complicated. Thanks to Trump’s new laws, divorce is undergoing a big change.
If you’re planning to file divorce, then stick to this post and find out how the new tax laws will affect you.
How can the new tax changes affect your divorce?
You won’t get tax breaks for alimony: Alimony won’t be tax deductible by the payor spouse after Dec. 31, 2018. As per the current law, the payer gets a tax deduction for the amount paid as alimony. But from Jan. 1, 2019, the spouse paying the alimony won’t get any tax benefit. On the other hand, alimony won’t be considered as a taxable income for the recipient.
Attorneys predict that there will be a surge in divorce filing this year since alimony negotiations will be tough when the change takes place. Spouses in the higher tax bracket may try to pay less since there will be no tax savings after paying the alimony. As per Brian Vertz, a family law lawyer in Pittsburgh, “The repeal reduces the bargaining power of vulnerable spouses, mostly women, in achieving financial stability after a divorce.” The following example can help you understand his statement.
Robert earns $600,000 a year. He is in the high tax bracket and pays $100,000 to his wife in alimony. But if you make all the calculations, you’ll find that he is paying only $50,000 after the tax deduction. His ex-wife Jenny receives $100,000 but is left with only $75,000 at the end of the tax season. She has to pay $25,000 income tax on $100,000.
After the new tax law comes into effect, the scenario will change. Robert earns $600,000 but he will try to pay only $50,000 to his ex-wife. Robert can argue that he can afford only $50,000. If that happens, then his ex-spouse will get only $50,000 every year, which is $25,000 less.
Try to file a divorce in 2018 before the new tax rule comes into effect. Although, it seems that the new tax law will help women. But this isn’t the case.
Much depends on how your attorney negotiates. If you earn less than your spouse, then you may try to execute the divorce agreement after Dec. 31, 2018. But remember, your soon to be ex-spouse will try his best to pay less for paying off his debts or other reasons.
You’ll get a tax break for medical reasons:
Irrespective of who wins custody of the child, the parent who pays medical bills of children after divorce can get a tax deduction on their tax return.
Either you or your ex-spouse can get a dependent exemption:
As per the current law, only one parent can claim a dependent every year. Usually, the custodial parent claims the dependent tax exemption. But as per the new law, the non-custodial parent can claim the tax exemption only if the custodial parent signs a waiver foregoing their right to claim the dependent.
You won’t have to pay tax for child support:
If you receive child support payments from your ex-spouse, you won’t have to pay income tax for it. However, your ex-spouse won’t get a tax break for making child support payments.
You can’t contribute to your retirement accounts:
In addition to getting less money in alimony, you may also find it tough to contribute to retirement saving accounts, since you can contribute only from taxed income. You can’t use the alimony for contributing to the IRA. So this is a disadvantage for you.
File divorce in 2018 if you don’t want to get trumped by Trump’s new tax laws.
More key changes for divorcing parents
There are a few more changes for divorcing parents who claim deductions and itemize their tax returns every year. For instance, you can’t claim tax deductions for the legal fees paid to your divorce attorney. Previously, you could deduct mortgage interest up to $1 million. Now you can deduct up to only $750,000. Moreover, you won’t get a tax deduction for the tax preparation fees.
Conclusion
The new tax laws can be changed in the tax year 2026 unless the government takes some steps before then. In the meantime, uncertainty about the new tax laws is already creating problems. Attorneys are getting calls from many divorced couples regarding alimony agreements. Some alimony recipients want to know if they can change their existing alimony agreements so that they can avoid paying income tax to the IRS. Attorneys have only one answer to these questions, “Don’t see the new law as a windfall.”
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