If you and your spouse have decided to go your separate ways, you may be wondering when the timing is right to finalize a marriage dissolution. With new tax laws in place, there are many things to consider as you begin the divorce filing process. For many California couples, finalizing their divorce in 2018 may be the best financial decision for their families’ futures.
First, starting on January 1, 2019, alimony laws will be changing. As of now, a paying spouse can list alimony as a deductible on their federal income taxes, while ex-spouses receiving alimony payments have to declare the money as taxable income. This “divorce subsidy” often benefited families and helped them save thousands of dollars. In the future, however, alimony is no longer deductible or taxable, which may mean that the receiving spouse will receive less money. Therefore, finalizing your divorce in 2018 may be beneficial, as alimony will still be deductible and taxable even when the new law goes into effect. That is, unless you modify your agreement to say that the new law will be applied.
Other new laws will impact the family home and will help you decide whether to sell the home before your divorce is finalized. One new law has eliminated some of the tax breaks that you were getting for home ownership. As a result, you may find that selling your home is the best financial decision for you and your family. The new tax code also affects divorcing couples with children. While you can still claim kids as a deduction, there will be no multiplier of kids deduction for tax years 2018 to 2025.
If you and your spouse have a pre- or post-nuptial agreement, some of the items you agreed to may be invalid thanks to the new tax laws. Your attorney can review your documents and determine whether you and your soon-to-be ex need to come up with a new agreement. Your attorney can also evaluate your case and help you and your spouse determine when the best time will be to file and finalize your divorce.