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Why Should I Finalize My Divorce Before the End of the Year?


There are many implications when a couple finalizes their divorce. The effects on custody of the children, residency in the family home and allotment of income for the children. There are also effects on taxation. This is one reason why couples want to finalize their divorce before the year ends.

Changes in the Tax Laws

Before the end of 2018, Pres. Donald Trump signed into law the Tax Cuts and Jobs Act. Its effect on divorces is with the alimony. 

Prior to the law, spouses that pay the alimony can declare a tax deduction for what they pay. Receiving spouses will have the alimony as taxable income. They will also have to account for the amount that they receive. 

With the new tax law, the tax will be shouldered by the ex-spouse who is giving the alimony. One of the projected results is higher tax since the ex-spouse giving the alimony belongs to a higher income bracket. 

It is assumed that the recipient of the alimony is a beneficiary because he/she will not pay taxes on what they receive. However, that may not be the case in actual cases.

How the New Law Affects Divorces

The law has taken effect on January 1, 2019, and there is no consensus on who gets to benefit. There are cases where the lawyers of the ex-spouse assigned to pay the alimony used the removal of the deduction as leverage to lower the actual amount that they have to pay.

Depending on the income status and circumstances, the judge can determine whether there is too much burden without the deduction. If so, he may decide to lower the alimony. In this case, the ex-spouse who should pay the alimony will end up with the benefit in the long run.

The recipient spouse enjoys alimony not declared as income. Alimony will not raise their taxable income even if they have additional money. They also avail of the considerations for the lower-income bracket.

Many lawyers point out that the tax obligations of the paying spouse and the receiving spouse used to be simple. But, there are complications that make divorce proceedings even more conscientious. Lawyers will need to explore different angles and simply having a spouse  lower income will not guarantee alimony.  

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Mr. Hutton is a Divorce and Custody Lawyer based out of Round Rock, TX. His background is with child psychology at Arizona State University where he received a B.S. in 2006, and he continued this by working with the Children’s Right’s Clinic at the University of Texas School of Law where he received his J.D. in 2009. Throughout his practice, he has been a strong proponent of utilizing modern technology to improve his practice and the representation of his clients. He currently is the technology chair of CAFA of Travis County and is committed to improving and modernizing the practice of law in Texas. If you have any questions you can contact him at timothy.hutton@austintexaslegal.com

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