People in Missouri considering divorce may wish to expedite their plans in order to finalize before the end of the year. This is because there are some changes to federal tax laws that will go into effect at the beginning of 2019. Some of those changes could have a serious impact on the future finances of people who end their marriages. For people who want to ensure they are governed current tax laws during their split, finalizing during 2018 may be a priority.
One of the most well-known changes to the the tax law that affects divorcing spouses involves a difference in the way that alimony is treated. Currently, the former spouse who pays alimony can deduct the sum of money he or she pays. For wealthy couples with a high-asset divorce, the difference can be substantial, as this deduction can amount to up to 50 percent of a total tax bill. On the other hand, the recipient pays taxes on the income in his or her lower tax bracket. The recipient can also invest the money in an IRA to save for retirement.
However, under the changes going into effect in the new year, alimony will no longer be tax-deductible for the payer. In addition, the recipient will no longer be taxed on the funds. Rather than a windfall, however, this is likely to represent an overall decline in the amount of alimony awarded and eliminates the opportunity to direct funds to an IRA.
For people concerned with this and other changes to the tax law, it may be important to finalize their divorces in 2018. A family law attorney can help negotiate a comprehensive settlement on behalf of such a client.