Divorce can be a financially complicated process that requires a significant amount of time from both parties. There are multiple steps to go through with California families no matter if they try to handle it in mediation or the courtroom. As tedious and emotionally draining as it can be, the spouses must pay close attention to ensure that they get everything they need out of the deal.
However, the new Tax Cuts and Jobs Act is causing some upcoming divorcees to panic. It dramatically affects how alimony payments to the lower-earning spouse work, and the Act is doing no favors for the higher-earning spouse. It is important for Californians to understand how this new law could impact the proceedings and how they should approach the matter.
Alimony gets worse
Typically, alimony was one of the parts of the proceedings that the higher-earning spouse did not look forward to, but it still had some benefits. Even though they had to continuously pay the lower-earning spouse for a long period of time, the previous statute allowed the higher-earning spouse to deduct these payments on their tax filings and include it on their taxable gross income.
Thanks to the Tax Cuts and Jobs Act, alimony payments are no longer a deductible expense. There is even more reason now that the higher-earning spouse needs to avoid alimony payments as they are now essentially just paying their ex and getting nothing out of it. The only ones who can get tax credit back are those who place more money towards child support and less in the alimony. However, California parents also have to worry about the tax exemptions for dependents getting cut.
A costly rush
Since the Tax Cuts and Jobs Act will not go into effect until 2019, many high-earning California divorcees are trying to get the divorce finalized now before the end of the year. It is understandable given the dramatic change in alimony payments, but rushing through the proceedings will do you more harm than good.
You need time to examine all of your assets, plan where you and your spouse will move to and try to comfort your child through the process while determining custody. If you rush through everything just to secure those tax breaks, you could lose multiple assets and custody time with your child in the process.
A family law attorney could help you save time and stress by helping you prepare your case. By collaborating with them, you can try to figure out the best deal you can get out of the separation whether it happens before or during 2019. While having tax breaks from alimony payments would be nice, you need to focus on the big picture and consider everything that is going to be divided in the proceedings if you want a financially stable future in the Golden State.