January is the most popular month for unhappy couples to file for divorce. However, recent changes to the tax law could leave some people in California confused and unsure of how to best move forward. With things like alimony, the marital home and more possibly affected, having a better understanding of the new laws could help some people ensure the best possible outcome for their divorces.
Individuals can now only deduct $10,000 for their state and local income taxes — also referred to as SALT. While capping these deductions might not seem like that big of a deal, it could disproportionately affect people in states with relatively high income taxes, like California. This is especially true in regard to divorcees who are hoping to maintain ownership of the marital home. In the past, these deductions have helped people who suddenly went from two incomes to only one stay in their homes, even if that income was only a moderate amount of alimony.
The new tax laws also affect alimony. In the past, a person who paid alimony to an ex-spouse could deduct the amount from his or her taxes. In some cases the deduction could even help drop the alimony payer into a lower tax bracket. The recipient would have to list the support as taxable income, but in general it still created a net reduction in taxes for the pair. That deduction has now disappeared, meaning that many people ordered to pay support will no longer be able to afford payments that are quite as large.
Both the changes to SALT and alimony can significantly affect the outcome of a person’s divorce. From whether an individual can afford to stay in the marital home to a variety of other issues, many California couples are facing unknown futures. Although this can be understandably frightening, most people can achieve agreeable outcomes when working alongside an experienced family law attorney.