As someone who divorced since the year began, or as someone who foresees a divorce in your near future, it is important that you recognize how new tax laws that took effect this year can affect you. People who divorce this year and moving forward will face certain tax implications that those who divorced before them did not, and some of these tax changes can have considerable effects on your bank account.
So, what types of tax changes should you familiarize yourself with? If you anticipate that a divorce is coming down the pipeline, understand that new tax laws will potentially impact you in these ways.
How you report alimony payments
While many people navigating their way through a divorce fight to avoid having to pay alimony or spousal support, those who ended up doing so, anyway, typically enjoyed certain tax benefits. More specifically, those who paid alimony up until this year were able to deduct the amount paid from their reported income, which typically resulted in substantial tax savings. The person on the receiving end of the payments, on the other hand, had to include the payments as part of his or her income. These terms no longer apply, however, and this could potentially make divorces where one party pursues spousal support particularly contentious.
The validity of the terms of your prenuptial agreement
Many people who are divorcing in 2019 are also finding that they need to revisit or modify their prenuptial or postnuptial agreements because of the tax changes. New tax laws have the potential to nullify some of the terms commonly outlined in these agreements, and not updating them accordingly could land you in hot water somewhere down the line.
Just how much these new tax laws will affect you when you divorce will depend on the specifics of your situation. However, most couples who part ways this year, or moving forward, will find that at least some of the new tax changes will be relevant in their divorce.