Charlotte Divorce Lawyer Blog
Board Certified Family Law Specialist Matt Arnold answers the question: ” Is there some property that the judge cannot divide?”
A couple has many things to think about when they are facing divorce, such as the effect the divorce will have on their children, how assets will be divided, and how much their lives are going to change once the divorce is finalized. However, another issue that couples facing divorce must consider is the impact that a divorce could have on their individual income tax returns.
In some divorce cases, one spouse agrees to pay a sum of money to the other spouse. These are called alimony payments. The alimony is used to provide the more dependent spouse with financial stability following the divorce. Alimony itself is not affected by any tax reform or changes, but the way that alimony is treated for income tax purposes is greatly affected.
The Tax Cuts and Jobs Act is causing a lot of controversy among divorcing, and divorced, couples. For the past 75 years, alimony has been treated the same way on income tax returns. The spouse who makes the alimony payment is able to deduct that amount from his or her income and the spouse who receives the alimony payment is to include the sum of the alimony payments in his or her income. However, all of that is going to change.
The Tax Cuts and Jobs Act eliminates the deduction of alimony payments from the paying spouse. Instead, the spouse cannot deduct any amount of alimony payments and keep the amount in his or her total income. Additionally, the spouse who receives the alimony payment no longer has to include the payments in his or her income. This new provision goes into effect on December 31, 2018. This act will have a large impact on alimony payments and may shift the focus from alimony payments to individual retirements accounts (IRA) in divorce negotiations and settlements, according to CNBC.
IRAs are predicted to be a bigger consideration in divorce than they previously were as a result of the elimination of the tax break from alimony payments. Instead of having to go through traditional means of obtaining alimony, like meeting certain requirements under state law and getting the payment approved by the judge presiding over the divorce, an alimony payment can be negotiated through the IRA. The spouse who is making the alimony payment is likely in a higher tax bracket than the recipient spouse and therefore appreciated the tax deduction of alimony payments. However, with the elimination of this, the couple may decide to use an IRA so that the paying spouse will still get a tax break. The paying spouse can give the recipient spouse payments from an IRA. The individual would have paid taxes on that, but giving it to the recipient spouse eliminates that and essentially gives him or her a tax deduction. The recipient spouse would still need to pay income taxes on the amount received.
Get Help From an Experienced Divorce Attorney
Divorce entails a lot of considerations and decisions. You need an attorney who is on your side and will look out for your best interests. The divorce attorneys at Arnold & Smith, PLLC are ready to represent you. We know that the law is ever-changing and we stay up to date with changes in the law so that we can best serve you. We will fight to get you the best alimony payment, or the lowest amount of alimony paid. Our concern is for you and making sure you are given all the tools needed to embark on this next chapter in your life. If you find yourself facing a complicated family law matter and need the help of experienced family-law attorneys in or around Charlotte, Lake Norman, or our new office in Monroe (by appointment only until 2019), please contact Arnold & Smith, PLLC today at (704) 370-2828 or find additional resources here.
The family law practice group at Arnold & Smith, PLLC includes two Board-Certified Family Law specialists and one Child Welfare Law specialist, as well as several attorneys with many years of family law experience that are committed to providing a powerful voice to individuals facing the often-tumultuous issues in this area of law. The range of issues our family law clients may be facing include pre- and post-nuptial agreements; separation agreements; post-separation support; child support (both temporary and permanent); absolute divorce; divorce from bed and board; military divorce; equitable distribution of assets; child custody (both temporary and permanent); retirement benefits and divorce; alimony and spousal support; adoption; and emancipation. Because this area of the law is usually emotionally charged and complicated, the family law attorneys at Arnold & Smith, PLLC act with the utmost dedication to ensure that each client understands his or her options, and then act to achieve the best result possible for that client’s particular situation.
Source:
https://www.congress.gov/bill/115th-congress/house-bill/1
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https://www.freeimages.com/photo/accounting-calculator-and-planner-1241878
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