In December 2017, Congress passed a major tax bill that is set to take effect starting January 1, 2019. Certain parts of the tax bill may affect those in Nevada who are looking to divorce. Therefore, it is important to understand how these new tax law provisions differ from current law and what this means for divorcing couples.
One major change to the tax law affects alimony, also known as spousal support. Going back to 1942, the party that paid alimony was able to deduct these payments on their federal income taxes and the party that received alimony had to count it as income for tax purposes. However, beginning in January there will no longer be a deduction available to the party paying alimony and the party receiving alimony will no longer have to report it as income. This new law will affect divorces finalized on or after January 1, 2019. If a couple finalizes their divorce by December 31, 2018, they will be grandfathered under the old law.
If a couple seeking a divorce has a child, the new tax law could affect them as well. As part of the divorce process, parents need to decide who will declare the child as a dependent for tax purposes and who will be allowed to take advantage of the child tax credit. But, starting in January, taxpayers will no longer be able to claim personal exemptions. However, the amount of the child tax credit has gone up. This may affect divorcing parents’ choices when it comes to negotiating child custody and support issues.
These are only two ways that the new tax law will affect those seeking a divorce. There are other changes not discussed here, and this post only provides general information and does not make any guarantees regarding a person’s specific divorce case. Those who need more information about the new tax law and whether they should try to finalize their divorce before the New Year will want to seek guidance from a family law professional, so they can make informed decisions.