How the New Tax Bill May Impact Divorce in North Carolina and Throughout the U.S.

Posted by Josh Valentine | Feb 14, 2018 | 0 Comments

Last year, Congress overhauled our tax code and made significant changes that will take effect in 2019. The new law touches on many areas of our lives - education, healthcare, and even the end of a marriage. If you're divorced or thinking about getting a divorce, it is important to understand how these changes will affect you.

Home-Related Deductions

When you get a divorce one of the biggest tasks you'll face is dividing and allocating your property and debts. Many times, couples consider the tax implications of these items when making these tough choices. Under the new law, many itemized deductions have either been eliminated or significantly reduced. Changes to itemization that will probably have the greatest impact on divorcing couples include two things:

  1. Reduced cap on the amount of mortgage interest that can be deducted each year; and
  2. Elimination of the home equity interest deduction.

Under the current law, a divorcing spouse may be more inclined to assume the family home's mortgage simply because it has a significant tax advantage. Under the new law, spouses may be hesitant to take on this debt when the tax benefit is reduced.

Attorney Fees

Couples going through a divorce often rely on attorneys to help them through the process. Today, taxpayers who itemize have the ability to deduct some of the attorney fees they rack up during the divorce process. For example, if you pay attorney fees while trying to secure alimony, those fees would be deductible under the current law.

The new tax law eliminates this popular and helpful deduction.

Alimony Payments

Alimony is an incredibly popular bargaining chip with divorcing couples. One spouse agrees to pay the other spouse a specific sum of money each year. The spouse who receives the alimony payments is required to include those amounts as income for tax purposes. The spouse who pays the alimony, however, is allowed to deduct the alimony payments from income for tax purposes. Spouses often agree to pay alimony because they get such tremendous tax benefit. In some cases, a spouse who pays alimony can even jump down into a lower tax bracket and pay less tax in the end.

The new tax law completely eliminates the alimony deduction. This will probably have two major consequences. First, couples may scramble to finalize their divorces before the end of the year. The deduction will only be eliminated for couples who finalize their divorce on or after January 1, 2019. Second, spouses who do get divorced in the future will probably resist paying alimony. This will make divorce negotiations more difficult and drag out the amount of time they take to resolve.

Consult With a Family Law Attorney

Are you thinking about getting a divorce? It is important to understand that the divorce process is probably going to change significantly because of these changes to the tax law. Losing out on deductions for alimony payments, home-related interest payments, and attorney fees will change how you approach the asset division part of your divorce. The best thing to do is become familiar with your options and understand how the tax law will affect your specific divorce.

The North Carolina family law attorneys at Caulder & Valentine can help you through this difficult time and equip you with the tools you need to get through your divorce successfully. Call us today to set up a free consultation and learn more.

About the Author

Josh Valentine

All through my life, I have personally witnessed family members and very close friends endure divorce, child custody battles, bankruptcy, civil lawsuits and even fraudulent criminal accusations. I both saw and experienced the stress such events can place on an individual, and I realized that everyone, at some point in their life, needs hope, comfort, and encouragement. In each one of those situations, the person that was best situated to provide that vital support was their lawyer.  So that's why I became an attorney.  I understand what you are going through—and I'm here to help you.  Our office is focused on meeting your needs and guiding you through what may be the most difficult time of your life. Before attending law school, I worked for a law firm focused on record clearing services, including expungements, pardons, and motions for appropriate relief.  The vast experience and understanding of North Carolina's expungement laws that I have acquired has given me an advantage in defending criminal charges, because not only do I fight for the best possible outcome in your case, but I am also continually conscious of the long term effects that a criminal charge or conviction can have on a person's life.  As such, I will do whatever I can to insure that my clients will not end up with a criminal record.  I was born in New London, Connecticut, but spent the first few years of my life in Dallas, Texas, before moving to Rutherfordton, North Carolina in 2001.  Upon graduating from high school, I attended Gardner-Webb University in Boiling Springs, North Carolina, where I majored in Accounting.  Eager to finish school, I began law school at Charlotte School of Law the day of my graduation from GWU, and completed my law degree in two years (instead of the typical three). During law school, I studied hard and strived to acquire the most experience possible so that I would be practice ready upon graduation.  The opportunities I gained included prosecuting criminal defendants through an externship with the Burke County District Attorney's Office, defending criminal defendants through Charlotte School of Law's Criminal Justice Clinic, and interning with Farmer & Morris, PLLC. I am blessed with a beautiful wife, Gabrielle Valentine, who is an attorney at Farmer & Morris, PLLC, in Rutherfordton, North Carolina.  In my free time, I enjoy helping with the youth group in my church, playing basketball and softball in our local church leagues, serving in the prison ministry, and spending time with my family.  Education: Charlotte School of Law J.D., Magna Cum Laude Class Rank – 21 of 328 Associate Editor of Charlotte School of Law Law Review Certification and Concentration in Employment Law Phi Delta Phi International Legal Honor Society Order of the Crown Pro Bono Honors CALI Awards (Highest Grade)—Lawyering Process I and Contracts I Full Scholarship Gardner-Webb University B.S. in Accounting, Summa Cum Laude Distinguished Senior Student Award – Highest GPA Alpha Sigma Lambda National Honorary Society Bar Admissions: North Carolina State Bar

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