Now that some of the dust has settled on the 2017 Tax Cuts & Jobs Act of 2017 (2017 Tax Act) it’s a good idea to look at two of the provisions that directly impact divorces.

Before going any further, here is my disclaimer: I am not a tax lawyer, CPA or accountant.

The relevant tax changes related to divorce are the personal exemption and the alimony deduction.

Personal Exemptions (a/k/a Dependency Deduction)

Beginning in 2018, the personal exemption is gone.  The personal exemption in 2017 was valued at $4,050 per taxpayer, spouse and dependent.

To put this in perspective, the personal exemption meant that you would not pay taxes on the amount of income equivalent to each $4,050 that you could claim—this would reduce the amount of taxes you paid.

So there was always your own exemption; and, in a divorce with children, the number of exemptions you could claim for each child.

As a result, most parents spent quite a bit of energy (and, consequently, attorney’s fees) fighting to see who would get to claim the kids on their tax returns as dependents.

The question, “Who claims the child on taxes in a divorce?” is now irrelevant. It’s now gone.  So, no more fighting about who claims the kids on the taxes.

A benefit may be that now uncontested divorces with children may be a lot easier if this was the only issue that could cause disagreement.

The Alimony Deduction after the 2017 Tax Act

In any divorce commenced after December 31, 2018 you will not be able to deduct the alimony you pay a spouse.  The receiving spouse will not have to pay any taxes on it.

As it stands until then, you can deduct  from your income the amount of alimony you paid to a former spouse.  This means that the former spouse will have to pay taxes on that alimony because it will be income to them.  So I guess it’s available for one more year.

The New York Post has a good summary of the issue of alimony and the deduction, along with some interesting statistics on total alimony paid, tax revenue, etc.

As far as Florida alimony law, Section 61.08, the alimony statute, lists as one of the factors to be considered “ The tax treatment and consequences to both parties of any alimony award, including the designation of all or a portion of the payment as a nontaxable, nondeductible payment.”  F.S. 61.08(2)(h).  In a contested divorce where alimony is an issue, this factor will continue to be relevant, or even more so, in terms of the amount that may be ultimately awarded, although the option for a particular designation may be gone and may require an amendment to it.

Of course, this tax change may provide a further support for alimony reform in Florida, which has seen repeated attempts to modify alimony in the last 5 years.

These topics are discussed here for information purposes only, and are not legal or accounting advice.  You should consult your own attorney and/or accountant to determine the impact of the tax law changes on your individual situation.
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