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Filing for divorce under the new tax law

One of the main takeaways for couples filing for divorce in 2019 will be the fact that alimony (called spousal maintenance here in Texas) will no longer be tax deductible for the spouse paying. This likely means an increased tax obligation to those who pay, but financial analysts believe there are still other areas where there are opportunities to save money or enjoy more financial flexibility in a divorce or family law agreement while remaining compliant with the new Tax Cuts and Jobs Act.

Changes will also impact such important issues as home ownership, how parents claim their kids and division of assets.

For homes:

  • Mortgage interest: Deduction thresholds are lowered from $1 million to $750,000. This applies back to Dec. 15, 2017 when the bill was voted on.
  • SALT: Deductions on local and state income taxes are restricted to $10,000 or less.
  • Capital gains: Home owners who sell a house will still be able to exclude $250,000 (filing individually) or $500,000 (filing jointly)

Regarding children:

Child tax credit: This goes up from $1000 to $2000 for each qualifying child when parents earn under $200,000 individually or $400,000 jointly.

Other payment options:

Now that paying spousal maintenance is taxable, there are other options to explore that may lessen the tax obligation, including dividing property by having on party pay back the other party by using a number of payments over a period. However, if a spouse falls behind on payments, property division can only be garnished at 25 percent, compared to 50 percent for spousal maintenance. To avoid the headaches of honoring a settlement, spouses can also agree to pay a single lump sum, which can reduce tension and provide a clean break.

A Board-Certified Family Law expert can help

These legal professionals offer knowledgeable guidance to clients in Colin County, Dallas County or Denton County as well as elsewhere here in Texas. They can help advise you on your legal options in order to ensure that your divorce or family law agreement is fair and enforceable in light of the changes under the new tax law.

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