Let me just say, it pays to know how this 2017 tax law may impact your divorce.
New Tax Law Enacted in 2019
Much of the 2017 law, the “Tax Cuts and Jobs Act,” which both houses of Congress passed on Dec. 20, 2017, went into effect in 2019. Yet, based on how these laws could impact your divorce today, you may benefit from getting your divorce completed with the help of a Certified Financial Planner (CFP). At the very least, you should talk to a CFP, such as myself, to run the numbers and discuss your goals.
As I sort through the changes this law involved, I have discovered that the Affordable Care Act was impacted, and this will be of major concern for women who are divorcing. For example, this law removed the penalty for lacking health insurance coverage as of 2019.
Deduction and Exemptions Revised
Also, the Standard Deduction has been increased for everyone as of 2018 — Single: $12,000, Head of Household: $18,000 and Married: $24,000. These are indexed for inflation each year. What’s more, personal exemptions have been eliminated. Other details that took effect included new tax brackets and changes in the Child Tax Credit. For the year 2021 only, the child tax credit increased to $3,000 instead of $2,000. In addition, the new tax law is affecting rules concerning Capital Gains, IRAs, Pensions and 401(k)s, as well as Home Equity exclusions.
Changes for Alimony and Maintenance
As I mentioned in my previous blog post, one change in the tax law may impact couples who are eyeing contractual alimony or spousal maintenance as part of their settlement agreement. Under the new law, divorced taxpayers who pay contractual alimony or spousal maintenance are no longer able to deduct those payments from their income. And recipients of this alimony also no longer need to report the money as income.
Be sure to discuss how this law may affect your overall finances and your divorce with your Certified Financial Planner or CPA to determine your course of action if divorce is in your future.