With tax rules and regulations, it’s important to follow any changes carefully as they may affect how you file your taxes after a divorce. One significant alteration to how taxes are handled in divorces occurred at the start of 2019. At that time, additional rules were added as a part of the TCJA, formally known as the Tax Cuts and Jobs Act of 2017.
These are some of the major changes and potential tax issues you’ll want to be aware of if you’re going through the already difficult process of picking up the pieces after the end of a marriage. All divorces and separations which occurred post-2018 are subject to these new laws.
What has changed under the TCJA
The spouse who is responsible for making alimony payments is no longer given the option to claim these payments as a tax deduction – as it is no longer considered a part of the recipient’s personal income. The upshot of this new guidance is that it clears up what was previously a highly confusing regulatory situation.
Another challenging tax issue that spouses had to navigate prior to the TCJA was over the issue of the dependency deduction. If the divorce happened or happens from 2018 to 2025, the dependency deduction does not apply. It’s not until 2026 that this deduction will go back into effect. This makes the age of the dependents a key consideration if the divorce falls within that time frame.
It’s hard to think about your taxes on top of everything else going on that you have to deal with in the unfortunate situation when a marriage comes to an end. For those who are dealing with such a life-changing event, it makes it all the more difficult to keep up with new laws that govern how you have to do your taxes when dealing with these circumstances.