With 2018 underway it is important to keep in mind the new tax laws that will be coming into effect. If you are recently divorced or considering divorce, there are several of things you will want to keep in mind as the new tax legislation has altered much of the preexisting taxation framework. Below are a few points to keep in mind.
Before making a major life decision and pursuing something as monumental as divorce, it is recommended you speak with a CPA. A divorce calls into question alimony, child support, asset splitting, and tax returns, all of which can be negatively impacted if not appropriately handled by a professional who is well-versed in the circumstances.
Consulting a professional has become exponentially more important with the new legislation that will take effect in 2018. Take into consideration something like alimony. Previously, alimony was deductible for the payer while the recipient paid income tax on it. In 2018 alimony will no longer be deductible for the payer, and taxes will not have to be paid by the recipient of the alimony. This new set of standards is likely to make it more difficult for the two parties involved to agree upon alimony without going to court to do so.
Child support should also be considered. The payer of child support cannot deduct payments from their taxable income. Likewise, the recipient of child support cannot include the amount received as taxable income. However, if you are in fact paying child support, you may be able to claim the child as a dependent.
At the time of a divorce, a CPA can handle the allocation of marital assets in order to avoid the greatest tax burden on the clients. Often during these times of high emotional and psychological stress, the divvying up of property can cause a conflict of interest between the two parties. It is at this time that the CPA will be tasked with determining an orderly division of property, precluding a stalemate. Generally speaking, the division of property will differ depending upon what state one resides in at the time of the divorce.
When considering divorce, keep in mind the date of December 31st. If a divorce has not been officially established before this date, then the two parties will be considered married by the IRS and will need to choose between “married filing jointly” and “married filing separately.” State laws will also play a role and they will differ from one state to the next. A CPA will be able to handle the geographical particulars involved.
We can help you sort out how these guidelines relate to your particular situation. We are happy to meet with you and work with your attorney to ensure that you are well prepared to handle the tax implications of your divorce.