Effective January 1, 2019, there are new tax laws that will significantly impact divorces. The first new tax law (and perhaps the most drastic) provides maintenance (formerly alimony) payments will not be deductible by the person paying it or treated as income for the person receiving it. As a result of the new tax law, divorcing spouses will likely more aggressively contest the amount of maintenance in cases where maintenance is appropriate.
However, those divorced on or before December 31, 2018 are grandfathered in, so the maintenance payments continue to be deductible by the person paying it and taxable to the person receiving it.
Important to note if those grandfathered in seek modification after January 1, 2019, the tax treatment of the modified maintenance will be governed by the parties’ agreement/judgment. If the parties want the modified maintenance to be taxed under the new tax law, they must specifically provide that in the modification order.
For those who have a pre- or post-nuptial agreement, the new tax law may nullify parts of those agreements, so it’s wise to see your lawyer and financial advisor.
Finally, couples who are divorcing on and after January 1, 2019 should be aware that children won’t offer the same tax benefits as before. The new law eliminated the $4,050 exemption for each dependent, but the child tax credit doubled from $1,000 to $2,000 per qualifying child.
These law changes make it critical you seek the advice and guidance of a divorce specialist. Call Nicholas J. Galasso now at 630-949-2061 or access our website at www.GalassoPC.com and schedule a free consultation.