A recent article in The New York Times questioned whether pending changes to the federal tax code are reason enough to hurry a divorce before the ball drops in Times Square on the new year.
Our Middlesex County divorce lawyers can give you a real firm “maybe.” Yes, the changes will have a real impact on many divorces next year. But when it comes to a ending your relationship, planning is probably going to prove more important than speed.
Recently we wrote about the tax implications the Tax Cut and Jobs Act of 2018 could have on spousal support agreements. Since World War II, the Revenue Act of 1942 has made alimony deductible for the spouse paying it and taxable for the spouse receiving it. Beginning Jan. 1, 2019, the paying spouse will lose the deduction and the receiving spouse will not have to pay taxes on it.
It is a significant issue as nearly 600,000 taxpayers nationally claimed alimony deductions totaling more than $10 billion for the 2010 tax year, according to the Internal Revenue Service. The IRS contends the old rules were abused by paying spouses who claimed higher deductions, and receiving spouses, who underreported (or did not report), spousal support as income.
In addition to questions about the tax implications of modifying existing agreements, there is significant question about how to interpret prenuptial agreements (which defined spousal support benefits under existing tax law).
Other coming tax changes will impact business valuations. Valuations could be raised by the tax treatment of some pass-through entities, where taxes are paid by the owner and not the business. Other changes will impact how a child’s college education is funded. Changes to 529 college savings plans will make them eligible for use at private schools.
While these are all important financial implications when it comes to divorce, neither individually nor collectively are they likely to be enough reason to rush through a divorce before the holidays.
What is important is that your Middlesex divorce attorney is aware of the pending legal changes and is fully apprised of the possible impacts on your case. That makes your own education and planning equally critical. There can be cases, such as domestic violence, where an immediate split is desirable and necessary. But even in those cases, early consultation with an experienced divorce lawyer can result in restraining orders and other legal remedies that can help preserve safety and your financial rights.
When most spouses contemplate a separation, they often think about the “house and kids.” While that is the logical and healthy place to start, it misses the many, many issues involved in a divorce. Reaching out for experienced legal help can both protect your rights and answer many questions you may not yet have thought of asking.
Call Rozin|Golinder Law, LLC today for a free and confidential consultation so you can determine what the best course of action is for your case.
