Time is ticking down before the Tax Cuts and Jobs Act (TCJA) goes into full effect on Jan. 1, 2019. Once it does, it will change how both alimony and child support are dealt with.
One of the most noticeable changes under the new law has to do with the elimination of dependent and personal exemptions that have historically existed.
Another is that standard deductions will be increased. This will make it more advantageous for newly divorced, single parents to file as Head of Household on their taxes. If the former couple shares only one child, then only one of them is eligible to take the standard deduction for them.
Child Tax Credits will also be increased to $2,000 from $1,400 with the new filing year. This per kid rate can reduce a parent's taxable income, meaning that they'll owe lower taxes each year.
Any spouse that is ordered to pay alimony as part of their divorce settlement on or after Jan. 1, 2019 will no longer be able to deduct it from their taxable income as they have been able to do in the past. Recipient spouses will no longer have to pay taxes on what they receive either.
The individual that is expected to be most impacted by this new law is the paying spouse. They've long relied on the reduction in taxable income that the payments have afforded them.
Now that they'll be unable take such a cut, many legal analysts contend that it will adversely impact how much they're willing to offer in alimony, meaning that the recipient spouse will be the ones left hurting the most in all of this.
The federal government is expected to generate some $1.5 trillion dollars in additional revenue once this law goes into full effect.
As TCJA is set to go into effect, it can be difficult for you to know whether it applies in your divorce case and, if so, how it impacts negotiations about child and spousal support. If you want to learn more about the alternatives to spousal support that exist, then a Fort Myers alimony attorney can provide you with guidance as to what those may be.