If you filed for divorce in 2019, your divorce settlement will be affected by new tax laws. These changes could significantly affect how you file your taxes in 2019 and what kind of financial support you can expect in the years to come.
How will alimony change in 2019?
This year, alimony payments will be subject to different tax procedure. Before, the person who paid alimony could deduct that from their taxable income, and the recipient of alimony would need to pay income taxes on it. This motivated the payer to pay more to receive a higher tax deduction.
This year, the situation has flipped. The person who receives the alimony will no longer pay taxes on it because the person who paid alimony will pay the taxes. The person who pays the alimony will not be able to deduct the payments from their taxes.
This could discourage the higher-earning spouse from paying high amounts of alimony. This may direct their financial focus to child support payments. However, there is no guarantee this will happen.
Dependent tax deduction or child tax credit?
If your family includes children that are dependents, you may be accustomed to receiving a tax exemption for each dependent. However, this year, the law has changed to awarding a qualifying (potentially refundable) child tax credit.
This credit is only available to the primary custodial parent unless you qualify for and file appropriate forms. This fact could further complicate your custody arrangement and other financial matters in your divorce.
If you are concerned over your alimony or child support payments in 2019, you may want to explore your financial and legal options. You could explore lump sum payments or other arrangements that equalize the tax burden on you and your ex-spouse. If you both feel that the arrangement is fair, you can build a family dynamic that is less stressful and more focused on your relationships.
