The tax code has always had a significant impact on divorce settlements, offering incentives for parties to compromise on child custody, support, and other important financial matters. However, the 2017 tax code overhaul removed many valuable deductions and limited others, upending long-standing conventional wisdom about how to settle a divorce. Below are a few ways the tax reform law might impact your family law case.
3 Tax Changes That May Affect Your Divorce
1. Alimony Is No Longer Deductible
Under the previous rules, a spouse ordered to pay alimony could deduct those payments from their taxes, reducing their overall tax liability and allowing them to recover some of their losses. The new law eliminates this deduction, shifting the tax benefit to the recipient, who will no longer have to report alimony payments as income. Based on this new development, your family law attorney may recommend making other concessions rather than agreeing to higher alimony payments.
2. The Child Tax Credit Has Doubled
In the past, parents could trade the tax benefits of raising a child as part of their negotiations. The Tax Cuts and Jobs Act doubled the popular child tax credit, from $1,000 to $2,000, and increased the income thresholds. This can make claiming the credit a valuable bargaining chip or a major point of contention in custody cases.
3. The Personal Exemption Has Been Eliminated
While the standard deduction has been doubled for singles and married couples, the exemption parents used to claim per child has been eliminated. If you have several children, the lack of tax benefits could complicate custody negotiations.
If your marriage is coming to an end, you can rely on the family law attorneys at Keily Mira Law in West Hartford, CT, to provide experienced guidance and outstanding results. Their team of attorneys maintains a constantly updated knowledge of every aspect of the system, so you’ll always get timely advice based on the latest legal developments. Visit their website for more on their family law services, follow their Facebook for updates and news, or call (860) 251-9552 to arrange a consultation.