While tax filing day has passed for this year, taxes are still an important issue for couples going through divorce. There have been some changes to the tax code this year that specifically affect divorcing couples. During divorce mediation at Westfield Mediation, LLC, we always talk about the tax implications of any financial agreement, and we encourage our clients to speak to their accountants as well.
The big change this year affected alimony (spousal support). Until 2019, the paying spouse got a tax deduction for alimony payments and the receiving spouse was taxed on the income. Starting this year, the rule reversed so the paying spouse is taxed on the income and the receiving spouse is not. As a result, a new calculation is needed to get to the same amount of alimony paid and received. Another tax change that impacts divorcing couples is the new cap on the deductions for mortgage interest. This policy change has made home ownership more expensive in New Jersey which also has to be considered when creating a financial plan for the future. Finally, the rules regarding tax exemptions for children was eliminated and replaced with a tax credit based on income, which may affect how much each spouse pays the IRS.
While each of the changes needs to be factored into a divorce agreement, in divorce mediation, we break the process down into small steps so it is not overwhelming to our clients. We recognize that getting divorced is an emotional process, and we help explain the money issues so that couples can create an agreement that works for their financial future.
For more information on financial plans or divorce mediation, please contact Randi M. Albert, JD, or Michelle Weinberg, M. Ed., Licensed Marriage and Family Therapist, at Westfield Mediation, LLC at 908.913.0373. View our website at www.westfieldnjmediation.com or email us at info@westfieldnjmediation.com.
The big change this year affected alimony (spousal support). Until 2019, the paying spouse got a tax deduction for alimony payments and the receiving spouse was taxed on the income. Starting this year, the rule reversed so the paying spouse is taxed on the income and the receiving spouse is not. As a result, a new calculation is needed to get to the same amount of alimony paid and received. Another tax change that impacts divorcing couples is the new cap on the deductions for mortgage interest. This policy change has made home ownership more expensive in New Jersey which also has to be considered when creating a financial plan for the future. Finally, the rules regarding tax exemptions for children was eliminated and replaced with a tax credit based on income, which may affect how much each spouse pays the IRS.
While each of the changes needs to be factored into a divorce agreement, in divorce mediation, we break the process down into small steps so it is not overwhelming to our clients. We recognize that getting divorced is an emotional process, and we help explain the money issues so that couples can create an agreement that works for their financial future.
For more information on financial plans or divorce mediation, please contact Randi M. Albert, JD, or Michelle Weinberg, M. Ed., Licensed Marriage and Family Therapist, at Westfield Mediation, LLC at 908.913.0373. View our website at www.westfieldnjmediation.com or email us at info@westfieldnjmediation.com.
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