How Tax Law Changes for 2019 Can Impact Your Divorce
There are significant changes that have been made to long-standing tax law that just went into effect in January of 2019. The prior tax law had been in effect for 75 years, so these new changes may impact any divorces filed this year and going forward.
At Bandle and Zaeske, LLP in Milwaukee, our Wisconsin divorce lawyers have experience in all areas of divorce and family law. We work hard to stay on top of all new changes in laws and statutes, in both Wisconsin and Federal law, so that we can inform clients of how any changes in the law may impact their divorce and family law cases. Our Wisconsin divorce attorneys also take the time to provide in-depth advice and counsel to help you understand the plan of action that is best for you, your family and your case.
The Tax Cuts and Jobs Act
These tax changes that impact divorces in the United States were passed under what is called the Tax Cuts and Jobs Act. The major change that may affect you has to do with alimony taxation practices. In Wisconsin, “spousal maintenance” is used in place of the term “alimony”. Under the old law, prior to 2019, payments for maintenance were tax-deductible for the payor of the alimony, and these payments were considered taxable income for the payee. Now, for divorces that conclude after January 1st of this year, maintenance payments are no longer tax deductible for the payor and are also no longer considered taxable income for the payee. This change may not affect former spouses who were divorced prior to January 1, 2019.
At first glance, this change may make those on the receiving end of maintenance happy; however, this change does not have the effect that it seems. While it is true that the money the payee receives in maintenance is no longer taxed, they will generally be receiving a lot less money too. The goal of the tax reform is to make each former spouse have an equal standard of living. This change also benefits the government, as it is expected that this tax change will raise well over six billion dollars for the IRS in the next ten years after it has been implemented.
How Will These Changes to Maintenance Taxation Affect Me?
If your divorce is not yet final, these tax changes will be in effect at the time your divorce is finalized. In order to adhere to the new law, if you are the spouse receiving maintenance, the amount you will receive will likely be reduced in light of the new tax laws. If you are the spouse paying maintenance, you lose out on the benefit of having your maintenance payments considered tax deductible. Under the new laws, there is generally less money available then to both spouses.
Additionally, it remains to be seen how courts will handle cases involving pre-nuptial or post-nuptial agreements that state a specific dollar amount that the spouses had previously agreed upon for maintenance in the event of divorce. Under the new tax laws, the amount previously agreed upon may no longer be fair or reasonable.
Due to these changes in the tax law, it is important to hire an attorney that is keenly aware of these changes in order to protect your best interests. The award-winning Wisconsin divorce attorneys at Bandle and Zaeske, LLP stay well-informed and are ready to help you move forward in your divorce case in such a way to minimize any negative impact the new law may have on you. Contact us today to schedule a free consultation, either by email or by calling us at (414) 359-1424. We work with clients throughout Milwaukee County, Ozaukee County, Racine County, Washington County, and Waukesha County.