As 2018 draws to a close, news about the Tax Cuts and Jobs Act of 2017 saturate media. New laws affecting divorce planning are around the corner.
If you are already divorced, you may worry about how TCJA will affect your current child support and alimony. If you are thinking of getting a divorce, you may wonder why the topic of divorce timing is in the news.
What will happen to your alimony?
If you currently receive or pay alimony, there is no need to worry. TCJA cannot affect your original alimony agreement or any modifications you already have in place by the end of 2018.
If you begin to pay alimony or modify existing alimony in 2019, here are the major changes you can expect according to The American Institute of CPAs: As the payor, you can no longer deduct alimony from your taxes. As the recipient, the IRS will no longer tax your amount as income. If you are the payor, the tax deduction loss can motivate you to pay lower alimony, which may result in acrimonious, prolonged negotiations with the recipient.
Why is timing an issue?
The new law starts at the beginning of 2019. It can have significant financial consequences. You may prefer to receive certain tax advantages by divorcing before the end of 2018.
Illinois has no waiting period for an uncontested divorce. One of you must live in Illinois for 90 days and neither of you can disagree with any part of your divorce terms. Make sure you understand all the uncontested divorce requirements. You may need a few weeks to get a court date, so schedule early if you wish to lock in pre-TCJA benefits.
How is child support affected?
Under TCJA, changes to child support pertain to all divorced parents. Whether you decide to divorce before or after 2019, you can no longer declare your minor children as personal or dependent federal tax exemptions.
TCJA represents the largest tax overhaul since 1986. You may want to study TCJA law or consult a professional for possible ways to maximize your benefits.