Finalizing Your Divorce in 2018 vs. 2019…Does it Matter?
Aug 7, 2018 | Written by: Share|
YES, finalizing your divorce in 2018 versus 2019 will make a difference, since the new tax laws will likely have many effects on divorcing couples.
When the new alimony statute went into effect in 2014, we awaited new case law to provide guidance on the nuances and effects. The same is likely to be true of the soon-to-be implemented tax laws, and some of what will happen is to be determined. That being said, preparedness is key. Knowing what you need to think about is half the battle. It is important to choose an attorney who asks the right questions and stays up-to-date on these changes as they are implemented, since the new laws may have significant impacts on your settlement.
As of January 1, 2019, the IRS will no longer permit alimony to be deductible by the payor nor taxable to the payee (recipient). How will alimony be calculated after 2018? Will attorneys address support in net dollars? What about calculating respective tax rates and deductions, which are often quite varied among spouses in a divorce where alimony is an issue? What about payroll deductions and other contributions that limit net pay, but voluntarily?
Will the tax changes affect premarital agreements? Will the IRS honor an agreement, entered into before the tax change, that negotiates for the deductibility of alimony?
Are there other changes in the tax code that may affect your divorce? What about changes in business taxation and, consequently, the business valuations performed incident to divorce?
What about the caps on real estate tax and other deductions that have been eliminated or phased out?
What about college and private school contributions to 529 accounts?
Is it better to wait and finalize your divorce after the new laws are in place and the implications are known?
These are just a few of the questions yet to be answered, but that need to be considered by you and your attorney in planning your divorce. Remember, the landscape is changing and the tax implications of some of these issues may be significant.
Diana Fredericks, Esq., is a partner with Gebhardt & Kiefer, PC and devotes her practice solely to family law matters. She is a Certified Matrimonial Attorney and was named to the NJ Super Lawyers Rising Stars list in the practice of family law by Thomson Reuters in 2015, 2016, 2017, and 2018, and to the New Leaders of the Bar list by the New Jersey Law Journal in 2015. Contact Ms. Fredericks for a consultation at 908-735-5161 or via email.
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