New Federal Law Affects the Practice of Family Law
On December 21, 2017 President Trump executed the Tax Cuts and Jobs Act of 2017 (TCJA) into law. The news did not really share how this would effect family law cases, but it does. Please note, Schwam-Wilcox & Associates, is NOT a tax firm and we do not have CPA’s or Accountants on staff, this is to share information and for you to have a bit more knowledge when you ask your questions to a tax specialist.
Alimony, personal exemptions, tax deductions and child tax credits (for child support) home mortgage and home equity loan interest, limitations on tax deductions, and the increases in the state and gift tax exemptions all have the potential to affect your dissolution action. These are areas that should be discussed with your CPA and your dissolution attorney in order to be sure that negotiation and mediations do not cause you tax problems and loss of deductions. Further, you need to protect your pre and postnuptial agrees that are entered into prior to the TCJA, some provisions in those agreements, specifically alimony provisions, may be affected or found to be unenforceable, which is why it is important to speak with a tax specialist in preparation for negotiations and mediations and not after you execute an agreement.
The part of the TCJA that has been given some attention is the elimination of the tax deduction a payor would receive for alimony paid to a payee. Pursuant to the TCJA, alimony payments required under a settlement agreement or judgment of divorce executed after Dec. 31, 2018, will no longer be deductible by the payor or taxable to the payee. That is not a typo, the act was signed into law in December of 2017; however, this portion of it does not take effect until January 1, 2019.
There are other changes that will effect small business, and 1099 income and how that is taxed, what value should be used when calculating child support and alimony; also, who should claim the child or children for the deduction and how will that affect child support and the amount given for alimony, or now that there is no difference regarding payment, will it be best to have unallocated support? These are all questions for your CPA and tax attorney in conjunction with your Family law attorney, as every case will differ based on incomes of the parties and other variables.
For more information on alimony, child support and unallocated support you can contact the attorneys at Schwam-Wilcox & Associates by calling 407-245-7700, e-mailing to firstname.lastname@example.org or by visiting the website at www.cbswlaw.com