In Western cultures, more than 90% of people get married by the age of 50. However, between 40 to 50 percent of marriages end in divorce. With the growing number of divorces and settlements, the changes in law made by the Tax Cuts and Job Act (TCJA) are more pertinent than ever. While the new tax bill affects all Americans and their tax returns, those planning or actively in the process of divorcing should be fully aware of how the new tax law changes affecting divorce. Check out four major changes below.
The Tax Cuts and Jobs Act introduced two substantial changes to how tax law treats divorce. Deductions for alimony payments required by post-2018 divorce agreements have been eliminated. The paying spouse can no longer claim tax deductions on the alimony, and spouses receiving alimony are no longer required to claim the support as income.
A tax exemption is like a tax deduction. It reduces your taxable income just as a deduction does, however, deductions involve more requirements. Prior to the new tax law, those who claimed a dependent would receive an exemption. In 2017, parties could exclude $4,050 out of their taxable income for each dependent. Since January 1st, 2018, that number is now $0.
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