Divorce can be one of the most stressful occurrences in anyone’s life. You are dealing with a broken home, the paperwork, the attorneys, and possibly the courts. The new tax law changes can add even more stress.
Here are some key issues you need to know on divorces effective January 1, 2019:
• Alimony paid is no longer tax deductible. Alimony received is also no longer taxable income. This law relates to payments under divorce decrees, separate maintenance decrees, and written separation agreements.
• Legal fees paid to attorneys to help secure alimony are not deductible.
• People that finalized the divorced before January 1, 2019 will grandfather in under the old rules. If their agreement changes in 2019 or beyond, the new rules could apply if the modification states that.
•The new rules could nullify some of the provisions of pre- and post-nuptial agreements. Terms may need to be re-negotiated.
One more thing to keep in mind is if a divorcing couple has children, the “head of household” designation is a key issue. This status carries with it the right to certain tax breaks, including the child tax credit. This has increased from $1,000 to $2,000 per child. Tax credits are extremely valuable because they reduce your taxes dollar for dollar. This is one of the most important details to solidify. An experienced individual accountant can help you navigate that decision.
For more divorce tax tips for individuals or to speak to an individual accountant in St. Petersburg, contact us today! We can help navigate changes to your taxes as your life changes.