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Spousal Support Changes under the New Tax Law

The "Tax Cut and Jobs Act" was signed into law on December 22, 2017. Along with the changes widely reported in the media, the new law changed a few significant income tax credits and deductions that affect divorcing or divorced couples and parents of minor children. One of the major impacts relates to spousal support.

The good news is that parents can deduct $2,000.00 in child tax credits per child on next year's income tax returns. Even parents who don't earn enough income to pay taxes can claim the credit up to $1,400.00. The new law allows parents to use 529 accounts for tuition at private and religious K-12 schools and for expenses for home-schooled children.

The aspect of the new tax law that has our attention is the elimination of the federal alimony deduction for those who pay spousal support. This important change will not take place until January 1, 2019.

For the past 75 years, the IRS has allowed the party who pays spousal support to deduct the payment from their annual income on federal income tax returns. The spouse receiving spousal support has been required to claim the spousal support payments as income on their federal income tax returns. Beginning in 2019, new spousal support orders filed by the court will be tax free to the recipient and will no longer be deductible to the party paying support. This is likely to have a substantial impact on support orders.

If you currently have a deductible spousal support order filed with the court, or you plan to file a deductible spousal support order in 2018, it will not be affected by the new law. However, changes to the support order after 2018 may remove this protection.

These are but a few of the changes in the new tax law that could affect your family law case. Check back for additional updates in the coming weeeks!

If you are currently going through a divorce or if you need to make changes to your current spousal support order, it is critical that you seek expert legal advice about how the new tax law affects you. Information continues to become available as the IRS implements the terms of the Tax Cuts and Jobs Act. Contact one of the experienced family law attorneys at FAMILY LAW GROUP, LLP to learn more about how this important new law may affect you.

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