The Tax Cuts and Jobs Act of 2017 (TCJA) has eliminated the deductibility of alimony after December 31, 2018. It is expected that the loss of the payer’s tax benefit may have the effect of reducing alimony payment to the payee. This article proposes some options and drawbacks to consider relating to the TCJA, prenuptial agreements and estate planning.
The divorce process requires taking stock of your finances. You will be expected to provide a detailed accounting of your assets and debts, as well as your income and expenses. If you and your spouse use credit cards and earn rewards or airline miles on trips and purchases (including work-related transactions), these rewards and miles are considered marital assets and are subject to equitable distribution. Read more in this article.
If you are in the process of finalizing your divorce, then you may very well pay less in taxes for many years to come if you can complete it by December 31, 2018. The high-earning spouse typically pays spousal support to the non-working or low-earning spouse for a number of years. Spousal support payments have been tax-deductible to the paying spouse and taxable to the receiving spouse until the Tax Cuts and Jobs Act of 2017 changed this tax treatment making spousal support non-deductible to the paying spouse and non-taxable to the receiving spouse as explained in this article. However, wealthy couples may be unable to complete their divorce agreements in time simply because they have more valuable and complex assets and rushing to complete the divorce by year end may not be the optimal solution.
Spring is here but so is tax season. If you are considering divorce or have started the process, historical tax returns have important information regarding income and assets. It is important to understand some of the underlying schedules of the federal tax return which may require a conference with your accountant. If you have doubts about the numbers shown on this year’s joint return, it may be better to file separately. Read this article for more information.