As of January 1, 2019, new tax rules for divorce instruments come under the new rules in the Tax Cuts and Jobs Act (TCJA) of 2017. The government implemented these changes due to tax under registering.

Alimony, Dependency, and Child Support

For divorce or separation arrangements carried out after 2018, the alimony is not subtracted by the spouse that is paying the alimony. This new rule simplifies the many issues that arose in the pre-2019 rules.

The TCJA has made the alimony negotiating between parties insignificant. This will remain so until 2026, after which the rules will go back to the previous ones. Therefore, any divorces involving children during that time will confer to the new tax rules issued.

A settlement can always be made between spouses as to who occupies the dependency exemption deduction, which is usually the parent with the custody of the children.

For the argument of whether child support is taxable, it is simple to say that it is not taxable or deductible. Until the child turns to age, the party needs to pay the child support in full, with no taxes or subtractions.

Property Settlements

Property settlements are also not taxable arrangements. If the property is transferred, the receiving party pays the cost basis of the property. So, during a divorce, not only is the fair market value taken into account but so is the cost basis.

Residence Sale

Usually in divorce cases, one party movies out of the house and the other remains in it. The profit from the sale of the house is divided justly between the two parties.

Business Activities

This is a complicated aspect of divorce. Generally, the party active in business dealings will keep ownership and the other will be justly compensated.

Divorce and Tax Considerations Fajardo And Associates can help