People in Illinois who are contemplating getting a divorce should consider whether it would be beneficial for them to finalize their divorce in 2018. They should be aware that certain tax changes that have resulted from the passage of federal tax laws become effective in 2019 and will affect financial decisions related to divorce.
One significant tax change to keep in mind is how alimony will be treated. For couples whose divorce is finalized in 2018, any alimony paid will be tax deductible, and any alimony that is received will have to be included in the recipient’s taxable income. This treatment ends in 2019, and it is very probable that it will result in the receiving spouses not receiving as much alimony as they would otherwise.
The changes in the tax law also will affect one’s decision regarding whether they should pursue ownership of the family home. With the new law, it will cost more to be a homeowner as the amount of mortgage that will be used to calculate interest deduction and the amount of property taxes that can be deducted will both be reduced. As a result, people who get a divorce may find it more financially prudent to rent or downsize.
Because there will be no personal exemption for the tax years from 2018 to 2025, divorced parents may not benefit from claiming their children as deductions. However, they may be able to claim other child tax credits, which will be increased when the tax law becomes effective.
A divorce attorney may assist clients with obtaining favorable resolutions to a range of divorce legal issues, such as property division. Litigation might be used to ensure that a client’s rights are protected regarding how marital assets are divided. The attorney may advise that certain assets undergo valuation.