Let me just say, it pays to know how the new tax law may impact your divorce this year!
Much of the new law, (the “Tax Cuts and Jobs Act”), which both houses of Congress passed on Dec. 20, 2017, goes into effect in 2019. Yet, based on how these laws could impact your divorce in 2019, you may benefit from getting your divorce completed in 2018. There are also some changes that take effect this year. At the very least, you should talk to a Certified Divorce Financial Analyst, such as myself, to run the numbers and discuss your goals.
As I sort through the changes in this new law, I have discovered that the Affordable Care Act will be impacted and this will be of major concern for women who are divorcing. For example, the new law removes the penalty for lacking health insurance coverage in 2019.
Also, the Standard Deduction has been increased for everyone for 2018– Single: $12,000, Head of Household: $18000, and Married: $24,000. However, personal exemptions have been eliminated. Other changes that take affect this year include new tax brackets and changes in the Child Tax Credit. In addition, the new tax law is impacting rules around Capital Gains, IRAs, Pensions and 401(k)s, as well as Home Equity exclusions.
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 would no longer be able to deduct those payments from their income. And recipients of this alimony would also no longer need to report the money as income. However, this only applies to divorces finalized after Dec. 31, 2018. So, depending on whether you are planning to pay or receive contractual alimony/maintenance, you may want to speed up or slow down your divorce proceedings.
Be sure to discuss how this new law may affect your overall finances and your divorce with your Certified Divorce Financial Analyst, CPA or divorce attorney to determine your course of action if divorce is in your future.