Tax Changes Affecting Family Law
The Tax Cuts & Jobs Act (TCJA), enacted December 22, 2017 provided for several changes in family law, and has had a significant impact on single parent families and divorcing couples. There are many financial-related items to consider throughout divorce proceedings, such as the impact of the new law on spousal and child support, identifying and dividing family assets, and the income tax implications on property transfers and the divided property.
Under TCJA, which are effective for divorce or settlement agreements entered into after December 31, 2018, a payor spouse would not receive a deduction for the alimony payments made. Although the recipient spouse would not report the alimony payments as income, the overall tax advantages to the divorcing couple would be reduced. As a result, divorcing couples need to understand how new TCJA rules apply and what options are available. For example, parties who fall under the pre-TCJA rules can retain the old rules or be bound by the new TCJA rules if they so choose.
Children will add another layer of complication to the divorce process. The custodial parent should understand the complex rules as they relate to the tax implications of lost dependency exemptions and how they interrelate to claiming child tax credits.
Property settlements should also be considered. Marital home becomes a prime issue in a divorce. Special rules apply to divorcing spouses who receive title to a home for purposes claiming the full exclusion of gain recognition upon the subsequent sale of the home.
The TCJA brought about several changes in itemized deductions. Where there are less deductions, and the available deductions become less valuable and less meaningful, parties will be less incentivized to agree to certain divisions and awards of property and debts in a divorce settlement.
Our professionals here at GCS have several years of tax planning experience that can help mitigate the costs of a divorce We understand that each family situation is different and take an analytical approach to formulate and customize a solution that will help you achieve your family’s financial goals. Please contact us on this matter or any other questions you may have.
Did You Know?
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Meet Our Team
Richard Scott DePerto (Rich) is a Senior Associate at Gramkow, Carnevale, Seifert, & Co., LLC (GCS.) He joined the GCS team in 2006 and has had experience as a controller and commercial real estate property manager as well. Rich specializes in real estate and family-owned businesses.
Rich graduated from Bergen Community College in 1975 with his Associates degree in Business Administration and his Bachelors degree in Accounting in 1977 from William Paterson University. He enjoys spending time with his family, gardening, landscaping, and traveling in his free time.
Should you have any questions or wish to speak to a team member, please don’t hesitate to call us at 201-599-0008.