Divorce and New Tax Laws in 2019

With last year’s Tax Cuts and Jobs Act set to take effect in 2019, many West Michigan couples have rushed to finalize their divorces before the end of the year. The adjustments to the U.S. Tax code, drafted in 2018, will implement changes, including the taxes and deductions related to alimony and spousal support payments.

In the past, the person making the payments was able to deduct the amount when filing their taxes while the person receiving the payments was taxed on the income. Under the new tax code, the payor no longer has the advantage of a deduction, and the recipient does not pay taxes on the income.

In previous years, the deduction may have dropped the payer to a lower tax bracket, incentivizing many to pay spousal support. This major change has driven many people, who may have already been considering divorce, to file before the end of the year.

Though the real impact made by the new tax laws remains to be seen, some professionals argue that the shift in tax liability may eliminate some opportunity for negotiation. By removing the deduction, the spouse responsible for writing the alimony checks may have more reason to push for lower payments. With the deduction no longer providing a potential tax advantage, the payer may fight harder to limit their responsibility.

In the past, the month of January has often seen an increase in divorce filings, since couples who were already struggling with their relationship often waited until the new year to file for divorce to reduce the negative impact on the holidays and related events.

However, the opposite will likely be true for divorce filings in 2019; January may bring a reduction in the number of cases filed since the push to beat the clock, and the new tax guidelines, will likely have run its course. Grand Rapids divorce attorneys, judges, and other legal professionals across the country may get a reprieve from the wave of new cases once the current rush is over.

If you are considering divorce now or in 2019, please consult a divorce attorney before taking your first steps. In Grand Rapids, please contact the experienced attorneys at Johnsen Wikander and let us help you through your most difficult time.