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

Posted by Josh Valentine | Feb 14, 2018

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 consultation and learn more.

About the Author

Josh Valentine

You could say Josh has a God-given ability for sustaining long-term relationships. He and his wife first met in elementary school and went to Gardner Webb University (GWU) together, where they tied for number 1 in their class. Then, they both started law school on the same day of their graduation and got married during their first semester. He has also known his law partner Blake Caulder since Kindergarten. Theirs is the perfect partnership. “He’s the brake; I am the accelerator,” Josh says. Both Josh and his wife attended an innovative program at Charlotte Law School that allowed them to complete law school in two years instead of the typical three. His wife graduated and passed the North Carolina bar at age 20, becoming one of the youngest attorneys in the state. He readily admits she’s smarter than him. Of course, Josh went on to pass the North Carolina State Bar himself and later the South Carolina State Bar. While in school, he was Associate Editor of the Law Review and received accolades like Phi Delta Phi International Legal Honor Society membership, Order of the Crown, Pro Bono Honors, CALI Awards (highest grade). In his career as a lawyer, he has been admitted to the United States Federal Court for the Western District of North Carolina, is a member of the American Association of Premier DUI Attorneys, and completed training for DWI Detection & Standardized Field Sobriety Testing. Josh has also been named to the Top 40 Under 40 for Criminal Defense by The National Trial Lawyers, the Business North Carolina 2019 Legal Elite for Criminal Defense, and the 10 Best Attorneys for Client Satisfaction by the American Institute of Criminal Law Attorneys three years in a row (2016, 2017, and 2018). Community involvement has been important to Josh all his life. In high school, he participated in building a Holocaust museum that has become internationally regarded. He and his wife are actively engaged in animal rescue, which currently means seven cats and two kittens. He served in prison ministry and assisted with fundraiser banquets there, and he provides pro bono and reduced fee legal services to those in need. As if all of that weren’t enough, Josh also mentors high risk youth and helps with his church’s youth group. He participates in other community volunteer projects involving construction, remodeling, drywall, painting, and landscaping. He’s an active student of the Bible and has traveled to Israel, Brazil, and Europe for mission work. No one can say Josh isn’t a well-rounded individual. In his spare time, he likes to play softball, basketball, and tennis, and he can play the piano and trombone. Sometimes on weekends, believe it or not, he enjoys pouring and finishing concrete with friends who own a concrete and grading business. In his law practice, Josh has made it a point to develop positive relationships with officers, clerks, and district attorneys, which has proven invaluable in delivering positive results for his clients. It’s important to him to both listen to his clients and fight for them. Law enforcement officers have important responsibilities to keep our communities safe and uphold the law, but one of the responsibilities of attorneys is to make sure officers do their job correctly. Josh considers it his job to hold them accountable for their actions. Josh is a person of deep faith. He knows that the established order of our universe and strength of America’s Judeo-Christian influenced court system is built on God’s word. His passion to serve each client with innovation, excellence and integrity is a byproduct of his faith. When asked why he became a lawyer, Josh says, “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 who 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.” 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