You have been thinking about divorce for a while now, and you have been doing your research. While you have not actually talked to your spouse about it or filed for divorce, you want to make sure you’re ready if it comes to that. You know it’s wise to plan in advance to make things go smoothly when you do act.
That is smart, but one thing to be wary of is that divorce laws do change. You need to stay up to date on the most current iterations. If you wait too long, there is a chance that information you’re counting on could become outdated, and that could lead to some serious mistakes. If you’re dedicated to getting ready in advance, you need to do it with the most recent laws.
As an example of how important this can be, let’s look at the recent changes to alimony tax laws.
The old law
Under the older laws, in 2018 and before, you could count money that you had to pay to your spouse as a tax deduction. This did not make up for everything that you paid, of course, but it lowered the financial impact. You did not have to pay taxes on that money, even though you earned it.
Of course, the government still wanted someone to pay taxes on the money, so they made that the responsibility of the spouse who received it. If you paid, then your ex had to count it as income. They needed to save some of the money to pay the taxes at the end of the year, the same way that they would if they were self-employed. It counted as income for them, even though they were not working. After all, alimony is to replace lost income.
The new law
In 2019, that changed. The Tax Cuts and Jobs Act makes it so that the person who pays cannot deduct those payments. If you are paying, you have to pay the taxes on the money that you give to your spouse. It’s your obligation now, whether that feels fair or not.
Your ex no longer has to pay anything on the money, saving them a considerable amount. It’s not treated as income. Any amount that they get is theirs free and clear. They don’t see any reduction, unless your court order gives them less money to account for it.
As you can see, this could massively change how much you can afford to pay in alimony, and you must know how that impacts you during a divorce. This is just one example, but it illustrates why you need to know the most current laws before you get to court.