If you are considering divorce, family law attorneys recommend acting quickly before new tax laws come into effect in 2019.
You must file an agreement with the court by October 1 for the agreement to be processed before new tax laws are enacted.
According to the new tax laws that come into force in 2019, maintenance payments for the payer are no longer deductible and no longer have to be taxed by the recipient.
According to family law attorney Lauren Taylor, here’s why. The IRS reports that the number of people reporting deductions for alimony payments significantly outweighs the number of people who pay taxes on alimony payments received. In short, the government cannot reconcile the numbers.
According to the current law, the income of a household is tax relieved through divorce, because the higher earner (usually with the higher tax bill) transfers income to the poorer earning spouse (who often has a lower tax rate). according to CNBC. The current codes help both save money.
Lauren advises couples to finalize their agreements before the new law goes into effect for two reasons. The law could cut child support payments by up to 30 percent. And the payer will not get the same tax breaks under the current law.
She recommends filing by October 1st in South Carolina.
“You have to wait 90 days from the filing date before you put an agreement on file and have a judge finalize it,” she said.
But that doesn’t mean the whole divorce has to be consummated.
“You can have a judge approve and sign the agreement and then wait another six months or nine months for your 365 to expire,” she explained. A no-fault divorce lasts a full year.
It can be like that Tom Leustek with the maintenance reform in New Jersey.
Current Tax Treatment: Spouse A now pays and deducts $ 30,000 in maintenance annually. Spouse A’s income is federally taxed at 33 percent, so the deduction saves $ 9,900. The lower-income spouse B owes 15 percent alimony tax and pays $ 4,500 in lieu of the $ 9,900 that would be due at spouse A’s rate. The two together saved $ 5,400, and having the allowance available for Spouse A makes more income available after the divorce.
Future Tax Treatment: Spouse A pays $ 30,000 in child support annually plus $ 9,000 in taxes. Spouse B receives tax-free income.
Critics of the tax changes argue that prayer will fight for lower alimony because they are not getting tax breaks to offset the payments.
The effects of the law on child support are not clear.