Happy smiling Ohio couples walk down the aisle to marry, say their vows and walk back along the same aisle expecting to begin a long and happy life together. In many instances this happens, but in many others it does not. Many marriages still end in divorce, and as another tax season has begun with new tax laws that affect the finances of a divorce, it may be beneficial to review the implications of the law on current tax filings.
The timing of the divorce or separation is important. A couple's marital status, for the purposes of the IRS, is determined by whether they were married on Dec. 31. This is important because of how alimony is treated under the new law as of Jan. 1, 2019. If the divorce was finalized by Dec. 31 and alimony is part of the settlement, alimony will be deductible for the payor and taxable to the payee.
If a divorce had not been finalized by Dec. 31, the couple is still considered married for tax purposes. The new alimony law went into effect on Jan. 1, 2019. The law now states that alimony payments are no longer deductible for the payor but neither are they taxable to the recipient. The effect of the new alimony regulations can reduce the amount available for alimony as the change can bump the payor into a higher tax bracket. Other assets such as real estate, retirement accounts and stock portfolios may be considered as part of a financial settlement.
Divorce is rarely easy and the financial ramifications can be complex. An experienced family law attorney in Ohio can review a person's financial situation and help the client to arrive at a fair settlement. A lawyer can help ensure major issues are not left out and that the important aspects of the divorce have been covered.