For many decades, alimony has been tax-deductible for the payor and tax-payable for the recipient. However, the Tax Cuts and Jobs Act will be reversing that situation for divorce agreements finalized after the end of 2018. Most experts agree that this means both parties will probably have less money as a result. In addition, the lack of a deduction could put some Illinois payers in a higher tax bracket.
One possible solution is to try to finalize the divorce agreement before the year’s end. In order to do this, prioritizing is critical. One should think about what they and their spouse want and need in order to quickly reach an agreement. They should also keep in mind that if they can put together a satisfactory agreement for now, it may be possible to modify it later if needed.
However, there are situations in which this is still not the best plan. Even though pushing a divorce agreement through before the year’s end means keeping the alimony tax structure in place, this may not be worth it if it means making a bad agreement. People may want to work with a certified financial planner to decide what the best approach is.
Property division can be a complex process even in a relatively amicable divorce because it is not always as straightforward as simply splitting assets. While some assets might look as though they have the same value, taxes could change that. Someone who is going through the property division process could get helpful legal guidance from a lawyer.