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Examining the new tax law and its effect on future divorces

There are several difficult matters that divorcing couples must resolve when they are ending their marriage, from assigning custody of the children to dividing marital assets.

During such an intensely personal process, the last thing on your mind could be new tax laws. However, in this post, we will explain how one change in the recently passed law will affect people getting divorced in the future.

What does the new tax law change?

As explained in this Associated Press article on the new tax law and spousal support, starting in 2019, people who divorce and pay spousal support will no longer be able to deduct those payments. Recipients of spousal support will no longer have to report it as taxable income.

By eliminating the tax incentive for people who pay spousal support, the new law attempts to make things simpler and eliminate reporting disparities that have been seen in tax returns involving spousal support.

How important is the change?

We have yet to see what the actual impact of the change will have, though there are predictions.

For instance, it is possible that without the benefit of a deduction, spouses who might wind up paying spousal support will have less incentive to agree to higher amounts than they have now. This can lead to contentious mediation sessions  and lower amounts  of support, making the situation even more difficult for the spouse who is at a financial disadvantage.

How will this affect people today?

The new rule will not go into effect until 2019, but that doesn't mean it won't affect people this year. For example, it could prompt people to push to finalize their divorce sooner, rather than later, to avoid the potential of it dragging out until next year.

It can also be something for soon-to-be married couples and married couples across California to consider with regard to prenuptial and postnuptial arrangements. Addressing the payment of spousal support in these documents can ensure you have your own guidelines in place.

Family legal matters are complicated. Should you have questions or concerns about your specific situation, it can be wise to discuss them with an experienced attorney who practices in that area. 

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