Recent reforms in tax law have changed the landscape slightly for divorcing couples. Mainly, the method of achieving balance is now different.
At first, tax credits, brackets and exemptions might seem arcane — and perhaps even irrelevant in the context of family law. However, these are very real considerations when planning the financial future of a divorced family.
The new tax law
As explained by the IRS, the major change in the recent Tax Cuts and Jobs Act — the official name of the tax reform law — is an adjustment to the way the government determines taxable income. This is a highly complex system, but here are some of the important alterations in terms of divorce:
- Different standard deductions
- Removal of income-based itemized deduction limit
- Changes to the child credit
The year of a divorce is likely to involve one of the most complex tax returns in anybody’s life. An advantageous tax plan requires a level of attention to detail that goes above and beyond the norm. The fact that the regulations changed recently indicates even more necessity to create specific, informed strategies.
The big change
An American Bar Association overview of the new law mentions one of the largest federal tax changes: the elimination of the alimony deduction. Although it may not have a major impact on the amount of spousal support once an agreement reaches its final, official form, this is a very different way of calculating alimony than the previous method.
Change is one of the only constants in tax law. Divorcing couples in particular often do well to give the matter some thought, along with the more common concerns of parenting plans, asset division and alimony.