Divorce brings with it inevitable change, and if you are among those planning to divorce in the months or years to come, it is important that you recognize all the ramifications associated with doing so. While your living situation, finances, childcare arrangement and so on will likely change in the aftermath of a divorce, so, too, will the manner in which you must file your taxes. Those who divorce in 2019 or after will find that their splits may have far-reaching effects, come tax time.
Certain new tax laws took effect early this year, and they will affect people who divorce in 2019 or later. What are some of the key changes, and how may they impact your finances and tax-filing needs?
Spousal maintenance considerations
One of the most significant changes people who divorce this year and moving forward will find when they file their taxes is that new provisions have changed the way alimony, or spousal support payments, factor in when divorced parties file. Until this year, the person who paid spousal maintenance was able to deduct the money paid from his or her taxable income, while the person receiving the payments had to include the spousal maintenance as part of his or her income.
Nowadays, this is no longer the case, and this may lead to increasingly contentious court battles. Why? While, previously, people who paid spousal support benefited from some nice tax breaks, this is no longer the case. Therefore, there is no real tax benefit at all to paying spousal maintenance, so those going through divorces may be more likely to fight vigorously against having to pay it.
Pre- and post-nuptial agreement considerations
New tax laws that took effect this year also have the potential to nullify some of the terms you may have outlined on your prenuptial or postnuptial agreements. Therefore, you may need to revisit the terms of these agreements, if you have them, to make sure they still meet your needs.
While these are two important tax law changes that took effect this year, please note that this is not an exhaustive list of all law changes that may impact you.