Tax changes put in place by the passage of the Tax Cuts and Jobs Act in 2017 will have implications for some Ohio couples who are getting a divorce. Two of the main issues deal with how deductions are taken for children and the treatment of alimony.
Instead of divorced parents being able to take turns claiming the child deduction, there will be a head of household deduction. To get this deduction, a parent must be single, pay more than half of the household expenses and have the child in the home more than half the time. There is also a child tax credit but no clarification from the IRS regarding whether this credit is tradable. Parents can write in the divorce agreement that they will trade this credit if regulation permit it, and this will potentially allow them to both benefit from it.
While alimony has been tax-deductible in the past, it will no longer be starting with divorce agreements signed in 2019. It is anticipated that this will result in lower payments for the recipient even though the recipient will not have to pay taxes on it any longer. This is one provision of the act that is not supposed to sunset in 2025, but couples may want flexible language in the divorce agreement in case Congress makes further changes.
People who are facing the end of their marriage might want to consult an attorney to talk about other financial implications. In the emotional turmoil of the process, some people may neglect financial matters, but it is important for people to protect themselves financially during a divorce. They should understand the value of all their assets including how the value of some may be reduced by taxes or other associated expenses.
