How tax changes may affect divorce cases

Couples filing for divorce in Illinois may be affected by the federal Tax Cuts and Jobs Act (TCJA). The changes will especially affect those who are paying or receiving alimony.

Beginning in 2018, parents who are head of household may be able to claim an additional $2,000 deduction per year for each eligible child. The deduction single filers can claim rose from $6,350 to $12,000; for head of household filers, the amount rose from $9,350 in 2017 to $18,000 in 2018.

In previous years, alimony was tax-deductible for those ordered to pay it. This encouraged many litigants to settle the alimony issue in divorce cases because they could enjoy an improved tax bracket status after the deduction. Deduction of alimony payments will no longer be allowed.

Recipients will no longer be required to pay taxes on alimony received, but considering the adverse impact of the tax changes on those required to pay alimony, many people will be more reluctant to agree to pay alimony if they can avoid it.

Separation agreements that were entered in 2018 and before will follow the old rules regarding taxes unless the final divorce decree states otherwise. Most of the tax cuts are expected to revert back to the previous rules in 2026, with the exception of alimony, unless Congress extends them.

An attorney with experience in family law may be able to answer any questions about how the tax changes may affect individuals who have filed for divorce or are thinking about it. The tax changes could affect how divorce cases are handled when alimony is involved because those ordered to pay it are losing the tax deduction benefit.

An attorney may be able to assist clients facing divorce by providing legal advice, negotiating with the other side, attending mediation regarding issues such as property division and child custody and preparing the case for trial if an agreement cannot be reached.