Divorce Tax Laws Are Changing
New changes to our federal tax laws that just passed Congress have profound implications for divorcing couples. If you are considering a divorce, you should definitely educate yourself on the new law to determine how it might influence your decision.
The new tax laws, passed under the Tax Cuts and Jobs Act, change one particular rule that has been in effect since World War II. Starting in 2019, alimony (called “maintenance” in Illinois) payments will no longer be deductible for the person paying them. However, because of the wording of the law, divorces that are finalized in 2018 will still be entitled to the deduction.
As one lawyer quoted in a Politico article stated, “If you’re going to get a divorce, get it now.”
Finances Can Determine Your Future
One of the most contentious aspects of a divorce is how much maintenance one spouse will have to pay to the other. For wealthy spouses who have a great deal of financial assets, these payments can amount to a huge sum. Critics of the new law fear that without the tax deductions, the wealthier partner will be less willing to give more to the less wealthy partner, as there will no longer be a way to offset those costs in taxes. Divorce proceedings will become more contentious.
This could especially affect women, as they tend to earn less money and are more in need of maintenance following a divorce.
For now, since the ability to deduct maintenance won’t be removed until the end of the calendar year, the law can be used as a bargaining chip. Couples, especially high-earning spouses, will have an incentive to agree to a divorce now rather than later, so they will be able to take advantage of the maintenance deduction. This might make them more amenable to a higher payment, as the other spouse could threaten to delay the divorce until 2019 otherwise.
For Advice for Your Unique Situation, Call Us
Going through a divorce is already a very difficult experience for everyone involved. Our years of experience with family law have taught us that it is often in your best interests to avoid acrimonious disputes, especially when children are involved. Having an experienced family law attorney advocating on your behalf can definitely help smooth the process.
At Nottage and Ward, LLP, we’re committed to getting our clients the best possible divorce settlement as quickly and painlessly as possible. Our job is to understand the laws completely, whether at the state or federal level, so that you don’t have to worry. Our deep understanding and experience allows us to provide our clients with the most timely and appropriate advice and counsel.
Don’t let the new tax laws catch you by surprise. Contact one of our friendly Chicago divorce tax issues attorneys at (312) 332-2915 today to schedule a consultation.
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