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Divorce and New Tax Laws in 2019

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.

New Tax Laws May Affect Alimony Settlements

New Tax Laws May Affect Alimony Settlements

The end of a marriage is one of the most difficult and stressful events anyone can go through. Many people have compared their divorce to the death of a loved one or the loss of a limb. Divorce is hard but entering into divorce proceedings unprepared will only make matters more difficult.

With the extra layer of uncertainty provided by our current political climate, it is extremely important to consider the effects that changing laws and tax codes may have on the outcome of a divorce. Any legal changes that affect personal finances, and how they are handled during and after a divorce, can be especially impactful.

Currently, proposed tax changes will end a law that has been in place for more than 70 years. Since 1942, alimony payments have been considered a deductible expense on personal tax filings. At the end of 2018, that law will be cut from the books.

The impact of such cuts on West Michigan couples could be far-reaching. Aside from the increase in cost to the payer, alimony payments from divorce may now become an even more hotly contested issue in divorce cases since it is likely to push either side in the case to disagree with the amount requested.

For the payer, the law means they will carry more expense for years to come. For the payee, the law could mean that they get a lower settlement in their divorce case, potentially affecting their quality of life. This major change has the potential to drive divorce rates up for the remainder of 2018.

For couples already struggling to find even ground in a rocky case, contesting an alimony request could add one more layer of turmoil and difficulty to their divorce proceedings. Before taking steps in any direction, spouses considering divorce should educate themselves on the changing laws and the potential effects.

Anyone considering divorce in 2018 should look to an experienced divorce lawyer for assistance and to become educated regarding the outcome of their decisions. Couples could easily end up fighting over a decision that may have been clear before changes to current laws. This could affect their ability to maintain a civil relationship once their divorce is final, which is an especially disruptive outcome for couples with children.

With any divorce, both parties should consider the importance of education and preparation. Please contact the experienced West Michigan divorce lawyers at Johnsen Wikander for help in understanding current and upcoming changes and how they could affect your case.