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Tax bill will have major impact on divorce deliberations

There has been much in the news recently about the Tax Cuts and Jobs Act and how it will affect Iowa residents and others in the country. One proposed change will have a profound impact on those couples who have decided to get a divorce. The new law will change how alimony is taxed. Therefore, the revisions will affect the payer and the recipient of the spousal support in different ways.

It is important to note that only the laws concerning alimony are changing. Those dealing with child support will remain unchanged. In 2019, the spouse paying alimony will no longer be able to deduct the amount on his or her taxes. In addition, recipient of the payments will no longer be required to pay taxes. According to industry experts, these changes will apply to any divorce that is finalized after Dec. 31, 2018.

The government estimates that over $8 billion will be raised in 10 years after this change is implemented. The payer of alimony will likely be in a highest tax bracket with the deduction being eliminated.  This could also affect someone's Social Security benefits or the ability to secure financial assistance for a child's education. For the recipient of the alimony, he or she may qualify for additional child credits since the payment will not be included in taxable income. Also, more financial aid opportunities may be available since the income level will be lower.

Alimony is simply one of the issues that will be discussed when someone decides to get a divorce. Child support, housing and asset division are other major topics that must be considered. A trusted Iowa divorce lawyer can help an individual through every step of the complex legal process, making sure every issue is adequately addressed with the client in mind.

Source: morningstar.com, "New Alimony Tax Rules Cut Both Ways", Karen Wallace, Jan. 25, 2018

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