We've been hearing a lot about the new tax laws that will take effect in January 2019. Now, just weeks away from the new year, let's discuss what Florida residents seeking a divorce can expect.
Shifts in alimony
You no longer can deduct the alimony you pay from your taxes. If you receive alimony, it's not taxable income any longer. As a result of the law change, high-income spouses likely will negotiate to pay less alimony since it no longer will provide the payer with a tax deduction. Divorce agreements must be executed by Dec. 31 for the former alimony rules to apply.
Pre- and postnuptial agreements
The tax laws could affect any prenuptial or postnuptial agreements, even those that have been in effect for years. The new rules could invalidate some provisions in these agreements. Ask your attorney about renegotiating the terms before divorcing, if necessary.
Children as deductions
Children no longer will be tax deductions to be negotiated. The exemption for each dependent was eliminated.
If you are divorcing in 2019 or beyond, you'll want to work with your attorney and your accountant to figure out what's most beneficial for you financially. For instance, as part of your settlement, you might want to grant possession of an Individual Retirement Account (IRA) to your former spouse if you are the higher-income spouse. The responsibility for paying taxes when the money is withdrawn goes with the account holder. The asset you take in return might not come with a tax bill.
Even if you're already divorced, the new laws could apply if divorce agreements are modified in 2019. Be careful and ask your attorney about the ramifications of modifying your divorce agreement.