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We Are An Inclusive Team. Call Us Instead Of Worrying.

Stephen Beroes, Elizabeth A. Beroes, Julie Elizabeth Beroes, and Shanice Williams
Stephen Beroes, Elizabeth A. Beroes, Julie Elizabeth Beroes, Shanice Williams

What you should know if you’re getting divorced in 2020

On Behalf of | Feb 17, 2020 | Divorce

Thanks to the 2017 changes to the tax code, divorce agreements signed after December 31, 2018 have been and will be significantly affected, particularly when it comes to alimony. Under the new laws, alimony payments are no longer taxable income for the receiver, and are no longer tax-deductible for the payor. This generally benefits alimony recipients in that they no longer have to claim alimony as income, and as a result, may qualify for certain social programs, as their income will appear lower than it actually is.

Another important change for alimony recipients is that they may no longer invest alimony payments into an IRA, which poses a challenge when it comes to saving for retirement for those who have alimony as their only source of income. As for the payor spouse, he or she can withdraw funds from their IRA to pay alimony without getting taxed, but the receiver will have to pay tax once they receive payment.

The new tax laws also prevent spouses from deducting divorce-related expenses (e.g. legal fees), as they are now classified as personal expenses.

Divorcing couples with children should also be aware that child support payments cannot be deducted by the payer and are not taxable by the spouse receiving payment. While dependency exemptions for children are no longer valid, a Child Tax Credit of $2,000 per child is still an option for people supporting kids under the age of 17. For parents supporting a child over 17, a $500 dependent credit may be available.

The latest tax laws can have a significant impact on your divorce proceedings. A divorce attorney in Allegheny County can review your case and explain how the changes to the tax law can affect you and your family.