Many divorces are completed without specific payment amounts referenced for college expenses. This scenario often…
The Tax Cuts and Jobs Act (TCJA) was signed into law on December 22, 2017. To ease the transition brought by the new law, the application of many individual tax changes were pushed back to take effect until 2019. One of those deferred provisions relates directly to couples seeking a divorce. Since the tax law has reached to every taxpayer in the U.S., this change will be widely felt.
Spousal maintenance under current Illinois law is calculated on basis of the spouses’ combined income and the duration of the marriage. Individuals who are proceeding with a divorce or seeking an award of maintenance will be impacted by a major shift in tax law with respect to tax treatment of maintenance payments. Maintenance, formerly known as alimony can be simply viewed as court-regulated financial support from one spouse to another after divorce. Before 2019, maintenance payments were deductible to the person making the payments and included as income by the recipient of the support. Going forward, the TCJA has eliminated this tax treatment, thus created a greater burden on the payor of maintenance, with rare exceptions.
The divorce process often represents an emotional and economic upheaval. If you are considering divorce or are in the process of one, contact our office for experienced, high quality representation.
Other Important Tax Notes for 2019
- The corporate federal income tax rate has been shifted to a flat 21%
- Mortgage interest deduction is capped at interest on $750,000 of mortgage debt
- Capital gain deduction on home sale continues to be $500,000 for married couples and $250,000 for individuals. To qualify, homeowners must live in the home for two of the previous five years.
- Various other changes including tax rates, tax credits, and standard deduction will be relevant on the tax return filed by April 15th, 2019.
- 529 savings plans, previously reserved for investments to be used for college tuition, are now available to be used for K-12 education. The plan can now cover up to $10,000 per year of K-12 tuition as well as qualifying college education expenses.