As of December 31, 2018, the Tax Cuts and Jobs Act (TCJA) has changed which tax benefits and exemptions are available to divorced couples. For example, some of these provisions include noteworthy changes to alimony and dependent exemption deductions. Before you file for divorce, it’s important to know how this reform bill can impact your post-divorce life.
The purpose of alimony, or “spousal support,” is to provide temporary or permanent financial aid to a lower-earning spouse. These court-ordered payments are intended to help the payee adjust to their single-income lifestyle. In the past, these payments were taxable to the payee and tax-deductible for the payor. As of January 1, 2019, this standard will no longer apply. On another positive note, this means that divorcing couples don’t need to worry about structuring their alimony to reflects current tax laws.
Dependent Exemption Deductions
The TCJA has eliminated all personal and dependent exemption deductions as of January 1, 2019. This means that parents can no longer claim children as dependents on their tax returns.
Child Tax Credit Rules
The Child Tax Credit is awarded to parents with qualifying dependents under the age of 17. To offset the loss of dependent exemption deductions, the TCJA is doubling the maximum child credit to $2,000 per child. Plus, up to $1,400 of this amount can be collected as a refundable credit. Unfortunately, it’s estimated that very few low to moderate-income households earn enough money to benefit from this provision.
Discuss Your Case with a Knowledgeable Divorce Attorney Today
Divorcing couples need to make countless legal and financial decisions before they can start the next chapter of their lives. If you have any questions about the TCJA or are preparing to file for divorce, contact the Temecula divorce attorneys at Hanson, Gorian, Bradford & Hanich today. Our experienced legal team has a comprehensive understanding of the state and federal laws associated with divorce and family law. We can guide you through each step of this legal process and help you secure a marital settlement agreement or divorce decree that safeguards your standard of living.
Contact Hanson, Gorian, Bradford & Hanich at (951) 506-6654 to schedule a consultation.