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How will divorce affect my taxes?

Divorce takes its toll on anyone, but one way you may not consider how divorce will affect you is during tax time. This life event can have major tax implications, depending on what your marriage was like or your divorce agreement included.

This is especially true since Congress passed the Tax Cuts and Jobs Act (TCJA) in December 2017. These changes take effect January 1, 2019, and they could cause extra stress for couples who are seeking a divorce or are already divorced.

Here are five ways divorce could impact your taxes in 2019.

1. Alimony will no longer be tax-deductible for payers

Alimony used to be tax-deductible income for the spouse paying it and taxable income for the spouse receiving it. The TCJA changed that, so now anyone who pays alimony will have to include those funds as taxable income, while recipients will be able to write off those dollars.

This could make alimony decisions more contentious when you are working through your divorce. Both of you may be fighting for dollars to make sure you have enough money in your post-divorce life.

2. Modifications could be subject to new tax rules

While couples who finalize their divorce by December 31, 2018 are subject to the older tax standards, there is a possibility they will still be subject to the new rules. If a divorce modification states that it is to be governed by the new rules, tax implications will change. If a modification says nothing, old rules apply. It may be useful to read all modifications proposed after January 1, 2019 carefully.

3. Child tax deductions will change

Previous tax law offered a $4,050 exemption for each dependent, through 2025, but the TCJA eliminated it. However, the child tax credit, which is supposed to offset taxes owed, has doubled from $1,000 to $2,000.

4. Standard deductions for single people will rise

The TCJA doubled the standard deduction, which for single taxpayers was $6,350 in 2017. In 2019, that deduction will be 2017.

5. Effects on pre- and post-nuptial agreements

Some prenuptial and postnuptial agreements could change, as the new rules could nullify many items in older agreements. A family law attorney can review any pre- and post-nuptial agreements and give you an answer on whether they are still valid or how they may need to change.

If you are considering a divorce, go into 2019 knowing exactly how your taxes could change as a result. This will give you the knowledge you need to finalize an agreement that benefits you.

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