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New tax laws may affect one’s finances after a divorce

North Carolina residents who are filing for divorce may be affected by tax law changes that go into effect on Jan. 1, 2019. These reforms will affect how alimony payments are taxed for newly divorced couples.

Starting in the new year, alimony payments cannot be claimed as a tax detection by the individual who is paying the alimony. Nor will payments be considered taxable income for those receiving alimony. This essentially reverses tax laws that have been on the books for more than seven decades.

The change has led many to try to get divorced before the Dec. 31 deadline. However, this is a complicated thing to accomplish late in the year. For professionals who work in family law or finance, these changes in the tax law have led to an increased workload as people rush to get things done before the end of the year.

Depending on what side of the alimony you are on, these changes may be seen as positive or as negative. What they do present for all parties involved is motivation to reevaluate the financial decisions that they make leading up to their divorce.

For example, changes in mortgage interest deduction rates could affect whether or not an individual wants to keep their home after a divorce. Capital gains taxes may allow divorcing individuals to exclude a higher amount of their income. This could make selling a home and dividing the proceeds the best option for some divorcing couples.

A family law attorney will help their client by providing advice on challenging questions connected to shared accounts and dividing property. Ultimately, legal counsel will look after the best interests of the client.