The 2017 tax reform act (TCJA) is already having an impact on support computations. As to spousal support (alimony), the repeal of the alimony tax deduction stays in effect until the end of the year 2018. This may result in a rush to get settlement paperwork or trials completed before the alimony repeal goes into effect.
As to the TCJA reform act changes effective in 2018, some elements of the legislation aim to reduce tax rates for businesses and individuals. There are increases to the standard deduction and family tax credits. There are new rules around itemized deductions. Dissomaster (TM) software which computes child and spousal support for California cases has already rolled out their first update to the software to take into account those tax law changes that were recently implemented. Dissomaster will roll out future updates to depict “what if” scenarios once alimony deductibility is eliminated.
Your divorce lawyer might strategically partner with a tax attorney or CPA to help you understand any tax consequences associated with spousal support and the marital estate. Certain issues can bring tax consequences that should be taken into account when calculating support and distributing assets.
Other Tax Issues: Retirement Accounts
Sometimes each spouse opts to keep his or her own retirement account. In other cases, retirement accounts are divided in a settlement via a court order known as a QDRO. Some clients will liquidate retirement accounts if the plans allow. Generally, there may be tax consequences for liquidation. A divorce attorney, teamed up with a tax attorney or CPA should be consulted to determine whether liquidation is immediately necessary, and what tax consequences it will entail. Options may exist to have funds directly paid out to the alternate payee of a 401K plan through a QDRO while avoiding penalties ( but not taxes). These plans must be reviewed carefully.
If You Need Legal Help
Zonder Family Law Group is a dedicated and our compassionate divorce attorneys strive to help you through this difficult time. If you are seeking a divorce or have further questions, call Zonder Family Law Group to arrange an appointment today at 818-309-7059.