Married couples in Texas who are planning to divorce may be wise to take action before the end of 2018 due to changes in the nation’s tax laws. Under the current rules, spouses who pay alimony can deduct it as an expense while spouses who receive support must pay tax on the money. However, this situation will be reversed when the provisions of the Tax Cuts and Jobs Act go into effect on Jan. 1, 2019. This could change the way spousal support is negotiated as spouses who make these payments generally pay income tax at higher rates than spouses who receive them.
Custody negotiations will likely also be affected as the new tax rules provide more generous child tax credits but eliminate personal exemptions until 2025. Couples planning to divorce may also wish to consider selling their homes before the new tax law takes effect as property tax deductions will be lower under the revised code.
Couples who do not plan to divorce but have prenuptial or postnuptial agreements in place should revisit these documents in light of the impending tax rules. This is especially important when provisions dealing with alimony or how real estate is to be distributed are crucial parts of the agreement.
Experienced family law attorneys are likely aware of the significance of the Tax Cuts and Jobs Act. They may call on tax experts and financial planners to help their clients make prudent and informed decisions. Legal counsel could also urge couples facing deadlines to seek common ground and negotiate earnestly to ensure that settlement agreements are drafted in a timely manner.