It may not be time to file your 2018 taxes yet, but people in Colorado should be aware of some significant changes to current tax laws that also affect family law issues they may face, especially if they have decided to end their marriage. Understanding how these changes will affect a divorce is critical to making decisions that are appropriate.
Under current law, those who pay spousal support are able to deduct these payments on their federal income taxes, and those who receive spousal support must report it as taxable income. However, under a federal tax bill passed in 2017, starting in January 2019 spousal support payments are no longer tax deductible to the paying spouse, and the receiving spouse need not report them as taxable income. Therefore, some couples may want to finalize their divorce before 2019, so they can stay grandfathered under current tax laws.
Another change in tax law has to deal with the child tax credit. Under the new law, a parent claiming a child under age 17 as a dependent will receive a $2,000 tax credit per child. This is important when it comes to child custody, as parents will need to negotiate which of them will claim the child as a dependent, and thus benefit from the tax credit.
Sometimes various areas of law intersect, and the new tax law also presents family law issues. The timing of a divorce is important, especially if it is anticipated that one spouse will be paying the other spouse spousal support. In addition, any child custody issues must be worked through, and some of those issues include who will claim the child as a dependent and thus benefit from the child tax credit. These divorce legal issues can be complicated, so those who are contemplating ending their marriage in the near future will want to ensure they are fully informed of their rights and options under the law before doing so.