Ask a Child Custody Lawyer in NJ: The Tax Cut and Jobs Act and My Divorce Settlement, Part I

The Tax Cut and Jobs Act (TCJA) passed in December of 2017, is major legislation that affects individuals, particularly families going through a divorce. Several changes were made to family tax credits and the kiddie tax. One of the key changes involved alimony or spousal support or maintenance. Previously, the paying spouse was able to deduct spousal support or maintenance payments made to the receiving spouse in his or her individual taxes. Effective January 1, 2019, that tax exemption will no longer apply. For more information on the impact of TCJA on alimony payments see our post, Alimony and the New Tax Law.                                                             

 Before we get started on the discussion for today’s topic, a disclaimer. The Giro Law Firm does not provide tax, legal, or accounting advice on this blog. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any transaction. You can also call us at (201) 690-1642 or request an appointment online to schedule a review of your divorce settlement.

Family Tax Credits

Tax credits help young families because they reduce the tax bill dollar for dollar, rather than just reducing the amount of income subject to tax like itemized deductions do. 

Beginning in 2019, the TCJA doubles the child tax credit to $2,000 per child under age 17. The TCJA also make more families eligible for the tax credit. Married couples with adjusted gross income under $400,000 and individuals with adjusted gross income of $200,000 are now eligible to request the tax credit, so long as they have qualifying children. 

The TCJA also includes a $500 nonrefundable credit for qualifying dependents other than qualifying dependents other than qualifying children (for example, a taxpayer’s 17-year-old child or elderly parent). 

These modifications are scheduled to expire after tax year 2025.

Elimination of the Individual Mandate Under the Affordable Care Act (ACA)

The TCJA also eliminates the individual mandate under the Affordable Care Act that penalized individuals who were unable to maintain healthcare coverage for themselves and their children. Many divorce agreements require one parent to maintain health care coverage for the children of the marriage post-divorce. If that parent lost health care coverage, then he or she was in violation of the divorce agreement and was subject to penalty assessed by the Internal Revenue Service (IRS). The obligation to provide medical health insurance remains, but the parent with the obligation will no longer be penalized. 

Understand the Tax Consequences of a Divorce Settlement

Ask a child custody lawyer in NJ today about the tax consequences of a divorce or modifying an existing divorce agreement to account for the impact of the tax changes on existing agreements. Helping families with their family law, elder law, and estate planning needs in Hackensack, New Jersey, our child custody lawyer in NJ can help you today. We also assist individuals with Medicaid planning, special needs, probate, and veteran’s aid. To request a consultation with a child custody lawyer in NJ, click here or call (201) 690-1642 today.