3 Steps To Save On Taxes
Divorce is expensive. Few households live on less than 50% of their income so splitting it in two almost always results in a lifestyle adjustment no matter how much money and income the family has. For families where one spouse is the primary breadwinner, going through a divorce is about to get even more expensive. Alimony, also called spousal support or maintenance, has been deductible by the payer and taxable to the receiving spouse for decades. This tax deduction is very important as it results in less money to the government and more money to split between the two households.
The Tax Cuts and Jobs Act eliminated the tax deduction for alimony in new divorces settled after December 31, 2018. Not only will alimony payers lose the deduction, but some may also be pushed into a higher tax bracket without it. And, they’ll still have to pay the spousal support with the fewer available dollars. For those reasons, couples going through a divorce where alimony is an issue are highly motivated to settle soon. Finalizing this year will grandfather them into existing rules allowing them to deduct alimony in future years as well.
So if you’re in the middle of the divorce, how can you finalize by New Year’s Eve?
1. Decide What You Really, Really, Really Want
The concept is simple, but the reality of articulating it isn’t. Few people stop and reflect on what they really, really, really want and why. What are the things you must have to set up the next chapter of your life? Having clarity will help you make smart decisions in settling quickly. It’s also important to consider what your spouse really wants and needs, and why. The more insight you can share with your professional team, the more effective your negotiations will be resulting in a more satisfactory outcome with less time and professional fees.