Does the timing of your divorce matter?
Divorce is one of the most difficult experiences a family can go through. Divorces are stressful and disruptive, and that’s when they’re amicable. It’s also a time of unsurety. With so many elements of your life undecided, it helps to have an excellent legal team by your side.
Lawyers can answer tough questions and divorce is a time of questions. Marriage is a lot like a business at times, and some of these questions and their responses will affect your taxes, just like it would if you were dismantling a business.
Whether you’re initiating the proceedings of divorce or not, you may wonder if the timing of your divorce matters. Is there a “best” time to get a divorce? The short response is yes, and there are some good reasons behind that.
It’s actually not so much when you start the proceedings, but when your divorce is finalized that matters. The IRS considers your marital status on Dec 31 to be representative of the entire year. If your divorce was finalized in that last week of the year, then the IRS will consider you unmarried for the whole year. This is for tax purposes. If the divorce hasn’t been finalized, you and your former spouse can decide whether to file jointly or separately.
Recently a bill called the Tax Cuts and Jobs Act (TCJA) was passed, and it affected the tax code immensely. In a very simplified explanation, what it did was to stipulate that divorces finalized in 2018 fall under the old tax laws, while those finalized after 2018 have to adhere to the new tax laws. The biggest change affects the taxation of alimony. Due to this new law, alimony awards do not garner any tax benefits as they once did.
Child support, property, and retirement funds
These new changes also affect the distribution and negotiation of child support, as well as the division of property and retirement benefits. It’s difficult to talk about things like your house or support for your children in such a stark way, but these elements need to be made plain. Knowing how the TCJA affects aspects of your settlement is crucial to your future.
Additionally, if you’re thinking of modifying your existing divorce agreement, you may feel some of the effects of this new law. This may seem arbitrary and unfair, but consider that a modification could affect the amount you pay out in support or alimony.
There’s a lot of “hashing out” during divorce proceedings, some pleasant, some not so pleasant. Regardless of whether you were the initiator of your divorce proceedings, you should consider how the timing of your divorce could affect you in the future.
Even if you and your former spouse haven’t communicated well lately, discuss the particulars of timing with him or her. Much of the time, it will be the lawyers discussing it for you. Hopefully you have excellent counsel like the lawyers at the Gucciardo Law Firm. Future you will thank you.
Too much information?
We focus exclusively on family law matters so we are always available to answer your questions and help.