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There are a multitude of things to think about when you are getting a divorce -- where the kids will live, which one of you will remain in the family home and how you will transition to single life. If you are like most people, taxes are not very high on your list of priorities. Even so, a divorce can have a big impact on your taxes -- especially in this coming new year. In January 2019, the new tax laws will finally be put into full effect and will mean some big changes for the way divorced couples handle their taxes.
The Tax Cuts and Jobs Act, which was passed in December 2017, will go into full effect in 2019. The new tax code will affect about half of all Americans. In the context of divorce, the new law will affect the taxes of those who pay and receive spousal support.
This new law will be the first change in 77 years to taxes affecting spousal support. Couples who finalized their divorce before December 31, 2018 will follow the current rules on who pays taxes on spousal support. Couples whose divorces are finalized on or after January 1, 2019 will follow the new set of rules on paying taxes on spousal support.
The new law was written in order to produce more money for the government -- but that also means less money for divorced couples. Under current laws, the person who pays spousal support can deduct the amount paid on their state and federal tax returns. The person who receives the spousal support payments is required to report the payments on their state and federal tax returns. Under new laws, the person paying the spousal support cannot deduct the support payments on their tax returns, and the person receiving the payments does not have to report them on their tax returns.
At the Law Office of Martoccio & Martoccio, we advise clients on every aspect of divorce, including tax implications. Our experienced Hinsdale, IL alimony attorneys can help you arrive at a fair spousal support award. We represent payor and payee clients. Call our office today at 630-920-8855 to set up a free consultation.