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How the New Tax Law Will Affect Divorce (and Your Financial Well-Being) in 2019

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Joliet alimony attorneysThe number of divorce cases involving spousal maintenance have declined significantly over the last decade. Still, some divorcing parties may need financial assistance from their ex-spouse to achieve a self-sustaining future. Disabled parties who may not have previously qualified for social security because their marital income was too high, stay-at-home parents with little to no recent job training or experience, and financially disadvantaged spouses incapable of maintaining the lifestyle that their marriage afforded are a just a few examples.

Starting January 1, 2019, the tax laws that currently apply to spousal maintenance (which have been in place for more than 70 years) will be completely annihilated. What might this mean for you in your Illinois divorce, and how might it impact your future financial well-being? Learn more in the following sections, and discover how our seasoned divorce lawyers may be able to help mitigate the issues in your case.

Understanding the Changes to Spousal Maintenance Tax Laws 

Spouses who pay alimony have long relied on the tax law that made their spousal maintenance payments tax deductible. Spouses who received alimony had to claim their maintenance payments as taxable income at the end of the year, but it did not always impact them at tax time, as few receive a high enough payment to change their tax bracket. A direct result of the Tax Cuts and Jobs Act's passage earlier this year, these changes will impact spousal maintenance laws, nationwide.

New Law is Expected to Leave Less Money for the Family Unit

Parties who expect to pay alimony in their divorce have long dreaded the turning of the calendar because they know it means they will likely have less money at the end of the year. What was not initially clear was how receiving spouses would be impacted. Sadly, their fate could result in downright disturbing financial consequences.

The reason for this is simple: The tax cut often dropped a paying spouse into a lower tax bracket at the end of the year, which gave them more discretionary spending money. As a result, paying spouses were often more likely to agree to a higher maintenance payment during divorce negotiations.

Joliet alimony attorneysBecause spousal maintenance payments will no longer be deductible, the payer's tax responsibility at the end of the year will remain the same, even if they pay alimony. If they were held to the same payment standard as before, they might end up with even less discretionary spending money (the amount a party has after their bills and expenses are paid) than the spouse to which they are making payments. Since the law would not allow this to happen in most situations, the paying spouse's maintenance obligation will likely be lower under the new law - so receiving spouses are getting less money. To make matters worse, paying parties may be less likely to even negotiate an alimony payment, as they are not receiving any benefits for paying. If ordered to pay, some parties still may refuse to do so, as there is no benefit for them.

How Our Joliet Divorce Lawyers Can Help with Your 2019 Divorce 

At Tedone & Morton, P.C., we work hard to protect the financial interests of our clients. Whether you expect to pay support or receive it in 2019, our seasoned Plainfield, IL divorce lawyers can help to mitigate the issues that may threaten your financial well-being. Call 815-666-1285 today.

Source:

https://www.cnbc.com/2018/11/29/new-divorce-tax-rules-could-result-in-a-big-financial-disadvantage.html

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