By now, many Massachusetts residents know about the new tax rules regarding alimony due to kick in as the clock strikes midnight New Years Eve. For decades, alimony payments have been tax deductible for the payer and taxable income for the payee. Many people considering divorce or in the process have known for some time that this situation will change as of Jan. 1, 2019, resulting in a rush, in some cases, to get a final settlement in place before the deadline. However, an expert says that divorcing couples who miss the deadline should consider other areas of tax law that are changing as of the new year.
Divorcing individuals should know about changes to mortgage interest rate deductions and the child tax credit before making decisions. For example, due to a new cap on deductions for mortgage interest payments, those people thinking about keeping the family home are wise to carefully consider whether they will see any tax benefits from doing so. As well, divorcing parents should know that the child tax benefit per qualifying child has doubled under the new rules.
With the new alimony tax rules in mind, divorcing couples may wish to consider alternative payment methods that may be more beneficial. For example, people may consider property division payments in lieu of alimony, since as of Jan. 1, there will be no tax differences between these two payment methods. However, it's important to know about the differences in treatment between property division payments and alimony in the event the payments are interrupted due to bankruptcy or for other reasons.
As the parties move through the divorce process, they need to carefully consider all possible options in all areas, including finances. In order to optimize their chances of a beneficial financial picture in the future, each party should know the facts, including new developments in tax laws. To help them with making important decisions, Massachusetts residents considering divorce can consult with a knowledgeable family law attorney for guidance.