In 2017, President Trump signed a tax reform bill, known as the Tax Cuts and Jobs Act (TCJA), into law. This reform of the Internal Revenue Code of 1986 is reducing tax rates for individuals and businesses, increasing the standard deduction, and eliminating personal exemptions. Experts are calling the TCJA the largest tax cut in history. However, what implications does the TCJA have on your divorce?
A judge may award spousal support, or “alimony,” to help a lower-earning spouse adjust to the change in finances that comes with life after divorce. These court-ordered support payments are currently taxable to the payee and tax deductible by the payor. However, after December 31,2018, this policy will no longer apply to divorcing couples or anyone pursuing a spousal support modification.
Child Tax Credit
Tax payers with qualifying dependent children under the age of 17 qualify for the Child Tax Credit. Under the TCJA, the Child Tax Credit is doubling from $1,000 to $2,000. Additionally, $1,400 of this amount can be refunded to the taxpayer, so long as the child is claimed as a dependent.
If a non-custodial parent wishes to benefit from the Child Tax Credit, he or she need the custodial parent to sign IRS Form 8332, which gives the non-custodial parent permission to claim the child as a dependent. However, it’s estimated that very few low-income or moderate-income households earn enough money to actively benefit from this change.
Dependent Exemption Dedications
Prior to the enactment of the TCJA, parents could exclude up to $4,050 per each qualifying dependent. As of January 1, 2018, all dependency exemptions have been repealed and eliminated under the TCJA. Now, custodial and non-custodial parents can no longer request or receive any dependent exemptions.
Learn More About These Important Tax Changes by Scheduling a Consultation
You have many important financial decisions to make before your divorce can be finalized, especially in light of the changes to the changes to the IRS Code. If you have any questions or concerns about how the TCJA can impact your post-divorce life, contact the Clearwater lawyers at K. Dean Kantaras, P.A. Our lead attorney, Konstantinos Dean Kantaras, has a comprehensive understanding of state and federal laws and is Board Certified in Marital and Family Law. If you have any concerns about your divorce, turn to our law firm for guidance.
Contact K. Dean Kantaras, P.A. at (727) 939-6113 to schedule a consultation.