If you are considering filing for divorce in Michigan, you should learn more about how changes to tax laws will affect the final economic cost of your divorce. If you are thinking about divorce, you may want to file as soon as possible in order to finalize your divorce prior to 2019, according to a recent article in Forbes. For many individuals in Michigan, getting divorced before the new year could save you a significant amount of money in the long run. What do you need to know about tax law changes and how they could impact you differently based on a divorce in 2018 versus a divorce in 2019?
Tax Deductions are Changing for Alimony and Spousal Maintenance
We have emphasized that tax law changes will affect alimony or spousal support deductions, but it is worth reiterating that finalizing your divorce prior to 2019 could save you a significant amount of money. Here is the basic information to know: Currently, former spouses who pay support or maintenance to the other former spouse do not have to pay income taxes on the income they earn that goes toward maintenance. Instead, the spouse receiving the maintenance pays the taxes on that money as if it were income.
For divorces finalized on January 1, 2019 and afterward, this method will switch. At that point, the party making the spousal maintenance payments will have to pay income taxes on any maintenance payments, and the recipient spouse no longer will have to pay income taxes on the amount of alimony she or he receives.
For anyone who is likely to be paying spousal maintenance in a divorce, it is important to file as soon as possible and have the divorce finalized before 2019. For anyone who is likely to be a recipient spouse, it could benefit you to wait to have your divorce finalized until after the new year.
Premarital Agreements Concerning Alimony and Spousal Support Could be Affected
If you currently have a premarital agreement that has a clause concerning alimony or spousal support, it is important to work with a lawyer to determine whether that clause is still valid given the changes to the tax law. For example, some premarital agreements might include an agreement for one spouse to pay maintenance in the event of a divorce, but that agreement may be premised on the spouse being able to deduct the payments from income taxes. Your divorce attorney can look over your premarital agreement.
Tax Law Now Makes Home Ownership More Expensive
Another significant tax law change that could affect a divorce concerns property taxes and home ownership. In short, as the article underscores, “the new law reduced the deductibility of property taxes and the amount of mortgage that qualifies for interest deduction, making it more expensive to own a home under the new tax laws.”
Further, selling a home while you are married allows you to save more in terms of the tax due than if you sell a home while you are single. If you own a home with your spouse and are considering divorce, a Michigan divorce lawyer can help you to decide whether it would be better to sell your home while you are married or to figure out the division of the asset once you file for divorce.
Seek Advice from a Michigan Divorce Attorney