Alimony – How New Tax Rules Can Affect It

Alimony – How New Tax Rules can Affect It - Peace Talks Mediation Services - alimony, taxes, COVID19, Coronavirus, tax filing - Photo by Kelly Sikkema on UnsplashDue 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.

How Does A Divorce Change Your Finances?

How Does A Divorce Change Your Finances? - Peace Talks Mediation Services - Divorce, Divorce Mediation, Finances - Copyright: <a href="https://www.123rf.com/profile_dolgachov">dolgachov / 123RF Stock Photo</a>

Are you in the very beginning stages of getting a divorce? Concerned at what your financial landscape will look like once your separation has been finalized?

One thing is for sure, many things will change after a divorce, and one of the most significant changes will be your finances.

Here are a few financial thoughts to keep in mind as you and your partner begin this difficult chapter:

  • Taxes can be impacted in various ways
  • Make sure to learn about ALL of your financial accounts, income streams, debts and assets
  • Alimony and child support payments can quickly drain your accounts
  • You and your ex will still be responsible for any shared debt
  • Think with a clear head, not a broken heart
  • Reach out to a financial mediator who is experienced in the divorce process

Going through a divorce is a time for significant life-altering adjustments and great emotional distress.

It’s vital to reach out to a financial expert who can objectively review your finances and discuss with you and your spouse various scenarios that may be available for both of you to reach a settlement that takes into consideration the entire family.

At Peace Talks, our team of experts focuses solely on mediating family law conflicts. We are a full-service mediation firm that specializes in helping people in Southern California settle their divorce in a sane and sensible manner.

We begin by helping you to articulate your financial needs, concerns, and objectives. Then, we help you identify accurate values for your assets, debts, income streams and expenses.

Whether you are getting divorced, planning your estate or negotiating a premarital agreement, our team of experienced, skilled divorce mediators and family law mediators will create practical solutions to difficult financial situations.

Contact us today to see how we can help you navigate through your finances in a civil co-operative environment!

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.

Don’t Overtax Yourself & Do It Now

by Stephanie Maloney

The new tax legislation will necessitate adjustments for many people dealing with alimony payments-both paying and receiving.

When you start to factor in things like tuition and college debt you get a sense of where your strategy needs to shift in order to maintain sufficient protection for your assets.

Your tax advisor is going to be swamped with requests from people worried about the deductions they have relied upon for some real relief before April 15Th. You can get a head start by assembling whatever (receipts etc.) you posses as well as your various investment and interest 1099’s and charitable contributions.

The more you can do before the tax appointment is more time the accountant can take to make certain you get all the deductions you are entitled to receive. You may even need to change your W-2 status to match the new money dynamics of the altered tax structure.

If you do need to make some changes it might maximize the process to do it as soon as possible. We’ve worked with some great advisors if you need some referrals.