Divorce is ranked as one of the most disruptive, stressful, and difficult experiences a person can go through in their life. Even in the best-case scenario where both parties agree to mutually separate, the actual process of splitting up two lives physically and financially can be quite daunting. Thanks to the new Tax Cuts and Jobs Act (TCJA) there is one more thing to worry about if alimony payments are on the table.
After January 1, 2019 alimony payments will no longer be tax deductible. Given that some of these payments can run into the thousands of dollars, the change can be quite expensive if you are required to make payments. Prior to the TCJA, the person obligated to make alimony payments could deduct these payments for federal income tax purposes and the person receiving the payments had to report them as taxable income.
Now for those receiving payments there are good news. Alimony will no longer be considered taxable income.
So What Happens if You Divorced prior to the Changes?
If your divorce is settled prior to December 31, 2018 the old rules will still apply and no changes will be made. This certainly puts pressure on those getting divorced to finalize the agreement this year if you are required to make payments or to delay it if you are the recipient of payments.
Our advice to you if you are going through a divorce is to check with your accountant to see what this may mean to you in terms of dollars, and to of course discuss this with your attorney.
Financial Planning During and After a Divorce
The impact of a divorce is often emotionally and financially profound. Separating assets can leave you feeling insecure about your financial future, and emotionally drained. Because divorce can happen at any stage of life we start by helping you put your financial picture back together. We then set up a plan to help you get back on track to meet your goals.
Contact us today to find out how we can help
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