Understanding The 2017 Tax Act: How It Alters Divorce Tax Issues

Due to the Tax Cut and Jobs Act of 2017, there are significant divorce tax implications to consider. Here are the main highlights:

Child-Related Divorce Tax Implications

The dependent exemption for children has been repealed. Many divorces award the exemptions to parents in a divorce. In place of the exemption, the child tax credit has been increased and will be available to higher income persons.

Shared Custody And Tax Deductions

It now becomes imperative if you have a shared custody arrangement that you keep a calendar to prove that you qualify for the head of household. There is a $500.00 penalty to preparers who do not diligently determine if their client has the child at least 183 overnights. The custodial parent automatically is awarded head of household.

Qualifying Rules For Tax Credits

There are other qualifying rules for claiming the tax credit which should be explored closely with your tax preparer and your attorney.

Spousal Maintenance Tax Implications

The Tax Act also eliminates the tax deductibility for spousal maintenance (alimony) for any decree entered after 12/31/18. The decrees entered before that date will still recognize deductible spousal maintenance (alimony); however, certain rules may apply should you modify a maintenance order after the above date. The deductibility of other certain expenses will also be eliminated or reduced including: home equity loans, medical expenses, state and local taxes, legal fees in some divorces, hobbies, tax preparation fees, unreimbursed employee expenses, to name a few. In crafting the final agreement or determining income available for support, these changes will need to be considered.

Conclusion And Legal Consultation

The above summary is not legal advice but merely an outline of some major issues to consider in finalizing or amending your divorce decree. Please contact one of Bosshard Parke’s experienced family law attorneys to arrange a consultation.