Tax Law May Affect Your Divorce in 2019
Changes in the 2019 tax code have the potential to significantly impact financial issues related to your divorce.
Sweeping changes were made to the federal tax code over the past year. While most people were originally optimistic that these changes would put more money in their pockets, the fact is they could have some negative impacts, particularly if you are separated from your spouse or contemplating a divorce. Marital property division, spousal support, and child tax credits are all areas that will likely be affected. The following outlines some of the key changes you need to discuss with our Pearland divorce attorney.
As a new tax season approaches, the Internal Revenue Service (IRS) is busy educating the public and implementing some of the sweeping changes to the tax code made through the Tax Cuts and Jobs Act (TCJA). As part of the tax reforms promised by President Trump over the previous year, these new rules go into effect in 2019 and will impact individual taxpayers, along with businesses, non-profits, and government agencies.
In terms of family law, the TCJA will have a major effect on divorcing couples over the coming year. Among the changes that could impact your case include:
Under Texas divorce statutes, all property and assets earned, acquired, or accumulated by a couple over the course of their marriage are to be divided between the two parties. This includes homes, vehicles, personal property, and money in financial accounts, along with any business interests and retirement benefits.
To better facilitate divorce settlements, certain property and assets may be sold or transferred from one party to the other. As federal tax credits pertaining to homes, business, and capital gains have undergone significant changes, you will want to factor in the new tax ramifications.
Spousal support, otherwise known as alimony, is one area that is being significantly impacted by tax changes. Previously, the spouse ordered to pay alimony was able to claim a deduction, which could be used entice more generous amounts.
Under the new tax law, paying spouses will no longer be eligible for this deduction, which could be a major factor in spousal support negotiations. According to Market Watch, it could also have been a factor when creating any pre or post marital agreements you have in place, which may now require updating.
For divorcing parents, deciding who is entitled to take child tax credits is often negotiated and written into divorce settlements. Under the TCJA, the child tax credit is now doubled. If your spouse has traditionally taken this credit, you may want to rethink those arrangements.
When dealing with complicated divorce cases and settlements that could impact your financial security for years into the future, you need John Powell III, P.C. on your side. To request a consultation regarding the specific issues in your divorce case, reach out and contact our Texas divorce attorney today.