Due to the COVID-19 pandemic, federal tax filings have been extended until July 15, 2020.
Often couples are blindsided by the tax impact of getting a divorce, but when you utilize the collaborative divorce process, you have a team of experts on your divorce team that will help you find your way out of the “jungle.”
When you and your spouse opt for a collaborative divorce, both of you are assigned a neutral financial expert. This expert will help you and your spouse project cash flows, determine adjusted net worth and share with you how your proposed settlement will impact your tax returns.
We are often asked, “How will our divorce agreement address alimony and how will it change our tax landscape?”
Here is the general gist of it:
- The tax treatment of alimony changed as a result of the Tax Cuts & Jobs Act of 2017 (TCJA).
- There are now dramatic differences based on whether the divorce or separation agreement was finalized before or after 2019.
- For divorces finalized before 1/1/2019 the alimony tax burden and credit remained unchanged by the (TCJA) unless the divorce agreement is changed.
- Before the new ruling, payments from the payer could be deducted. The spouse who received the payment was required to report the alimony as taxable income.
- As a result of this new ruling, divorces finalized after 12/21/2018, the payer can no longer deduct alimony payments.
This new ruling can be very costly to the spouse who pays out the alimony and needs to be considered into the financial landscape of your divorce agreement before finalization.
At Peace Talks, our team has the experience and expertise to provide complete and accurate financial information, including tax advisement. We will work effectively with you, your attorneys, and other professionals to accomplish your financial goals in a collaborative environment.
Contact us today to see how we can help you and your spouse mediate a financial agreement that works well for all involved.
Note: This information is general in nature and should not be construed as legal/financial/tax advice. You should work with your attorney, financial, or tax professional to determine what will work best for your situation.