January 29, 2018--Tax Issues and Divorce in Colorado and
Spousal Maintenance under the new tax law
Time for my first blog post! We decided that since it’s the time of year that everyone is getting ready to file their taxes that this would be my first subject. This is a very complex issue that was made even more complex by the recent passage of the new tax bill. I am going to touch on the major issues that you should be thinking about if you are already divorced, in the middle of a divorce or contemplating divorce and advise that you talk to both a tax expert and an experienced family law attorney, especially if you fall in one of the last two categories!
1) Already Divorced: This one should be simple because your final Court Orders, if done correctly, should address taxes, how you are filing and who is claiming what. If you were divorced on or before December 31, 2017 you will be filing single for 2017. If your divorce became final sometime in January 2018 then you must filed a married return, either jointly or separately. If for some reason your final Court Orders do not address how you file, who gets to claim the interest on the house and who gets the exemptions for the child(ren) then before you do anything else please seek legal advice!
Tax exemptions for the child(ren) are usually tied to incomes and child support. If incomes are close to equal then chances are good that you are dividing equally the child exemption(s). However, if the party Court Ordered to pay child support is not current on their payments for 2017, then they should not claim the child exemption(s). If your final Court Order is clear and it says that you claim the child(ren) this year but when you try you discover your ex has already claimed them, please immediately contact an attorney because this can be rectified, if not through the IRS then through the Courts.
2) In the middle of a Divorce: Most people want to file their taxes sooner rather than later to receive that tax refund. Usually it is best for a married couple to file a joint return to get the best benefit. It would be best to try to reach an agreement with the other side before filing. If you don’t, this could raise another issue that a Judge must decide. Usually a Court wants the parties to file the way that gives them the most refund so it is always advisable to seek the advice of a tax expert to help you decide this. If you cannot agree on what to do with the refund, you can agree to either put it in an attorney’s trust account until an agreement can be reached or some such similar method. Sometimes, given the circumstances, one party goes ahead and files usually leaving the other party in a position where they will owe taxes. This is something that can be addressed at the final orders hearing to hopefully even out the damage. But again, best advice here is to reach an agreement or hold off until you can get Court Orders addressing how to file. Please talk to the experts before you do anything!
3) Contemplating Divorce: This one is where it gets really tricky because of the new tax law! Absolutely imperative, if you are thinking about divorce, you need to talk to an attorney now!
The major change in the new tax law that affects divorced couples the most is the one dealing with spousal maintenance (also known as alimony). Up until now spousal maintenance is treated as income for the payee spouse and is deductible for the payor spouse. However, due to the new tax law for all divorces entered after December 31, 2018, this is no longer the case. Spousal maintenance will be treated like child support in the eyes of the IRS and WILL NOT be income to the payee spouse and WILL NOT be deductible for the payor spouse. This is a big change that is going to have a huge impact on the amount of spousal maintenance awarded to spouses. Again, this only affects divorces granted after December 31, 2018, so if you are thinking about whether to file for divorce or not please talk to an attorney as soon as you can so that they can help you make this decision wisely.
The other change made by the new tax law is that starting with tax year 2018 (tax returns filed the beginning of 2019), there are no longer personal tax exemptions, but there is an increase in the child tax credit. Please talk to a tax expert to see how this will affect you going forward especially if you get divorced and will be filing single.
Hopefully this gets you thinking about what you need to consider when it comes to filing your taxes as well as what your need to address in your divorce. Bottom line is seek out advice before doing anything!
We offer free initial consultations so please give us a call!
Spousal Maintenance under the new tax law
Time for my first blog post! We decided that since it’s the time of year that everyone is getting ready to file their taxes that this would be my first subject. This is a very complex issue that was made even more complex by the recent passage of the new tax bill. I am going to touch on the major issues that you should be thinking about if you are already divorced, in the middle of a divorce or contemplating divorce and advise that you talk to both a tax expert and an experienced family law attorney, especially if you fall in one of the last two categories!
1) Already Divorced: This one should be simple because your final Court Orders, if done correctly, should address taxes, how you are filing and who is claiming what. If you were divorced on or before December 31, 2017 you will be filing single for 2017. If your divorce became final sometime in January 2018 then you must filed a married return, either jointly or separately. If for some reason your final Court Orders do not address how you file, who gets to claim the interest on the house and who gets the exemptions for the child(ren) then before you do anything else please seek legal advice!
Tax exemptions for the child(ren) are usually tied to incomes and child support. If incomes are close to equal then chances are good that you are dividing equally the child exemption(s). However, if the party Court Ordered to pay child support is not current on their payments for 2017, then they should not claim the child exemption(s). If your final Court Order is clear and it says that you claim the child(ren) this year but when you try you discover your ex has already claimed them, please immediately contact an attorney because this can be rectified, if not through the IRS then through the Courts.
2) In the middle of a Divorce: Most people want to file their taxes sooner rather than later to receive that tax refund. Usually it is best for a married couple to file a joint return to get the best benefit. It would be best to try to reach an agreement with the other side before filing. If you don’t, this could raise another issue that a Judge must decide. Usually a Court wants the parties to file the way that gives them the most refund so it is always advisable to seek the advice of a tax expert to help you decide this. If you cannot agree on what to do with the refund, you can agree to either put it in an attorney’s trust account until an agreement can be reached or some such similar method. Sometimes, given the circumstances, one party goes ahead and files usually leaving the other party in a position where they will owe taxes. This is something that can be addressed at the final orders hearing to hopefully even out the damage. But again, best advice here is to reach an agreement or hold off until you can get Court Orders addressing how to file. Please talk to the experts before you do anything!
3) Contemplating Divorce: This one is where it gets really tricky because of the new tax law! Absolutely imperative, if you are thinking about divorce, you need to talk to an attorney now!
The major change in the new tax law that affects divorced couples the most is the one dealing with spousal maintenance (also known as alimony). Up until now spousal maintenance is treated as income for the payee spouse and is deductible for the payor spouse. However, due to the new tax law for all divorces entered after December 31, 2018, this is no longer the case. Spousal maintenance will be treated like child support in the eyes of the IRS and WILL NOT be income to the payee spouse and WILL NOT be deductible for the payor spouse. This is a big change that is going to have a huge impact on the amount of spousal maintenance awarded to spouses. Again, this only affects divorces granted after December 31, 2018, so if you are thinking about whether to file for divorce or not please talk to an attorney as soon as you can so that they can help you make this decision wisely.
The other change made by the new tax law is that starting with tax year 2018 (tax returns filed the beginning of 2019), there are no longer personal tax exemptions, but there is an increase in the child tax credit. Please talk to a tax expert to see how this will affect you going forward especially if you get divorced and will be filing single.
Hopefully this gets you thinking about what you need to consider when it comes to filing your taxes as well as what your need to address in your divorce. Bottom line is seek out advice before doing anything!
We offer free initial consultations so please give us a call!
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