Going through a divorce can be a stressful, contentious experience even under the best of…
When people in Kansas make the decision to end their marriages, they often find that the financial aspects of a divorce can be among the most significant. This is one reason why changes to the tax code that affect the way divorces are handled are compelling many couples to try to finalize their divorces before the end of 2018. These changes can have a significant effect on both parties to the divorce with long-term financial repercussions.
One of the most well-known changes to the tax code affects the way alimony and spousal support are handled. These changes will only impact divorces that are finalized on January 1, 2019, and thereafter. However, the changes will have no impact on divorces that are finalized before that date. Under the current system, the individuals who are responsible for paying alimony can deduct the amounts they pay from their taxes each year. For people in high income brackets, this can cut up to 50 percent from their annual tax burden. In addition, the recipient pays taxes on the spousal support income in his or her own, usually lower, tax bracket. Those funds can also be directed to an IRA for retirement.
Under the new guidelines, alimony will no longer be tax deductible for the payer. In addition, the recipient will no longer need to pay taxes on spousal support While this may appear to be a boon for the person who receives alimony, it is likely to drive overall support amounts downward and lead to a greater share of the pie going toward the IRS rather than either person.
In order to continue under the current system, couples can finalize their divorce on or before December 31, 2018. A family law attorney can represent a divorcing spouse on matters including property division and spousal support in order to finalize the agreement prior to the changes coming into effect.