It’s only less than a year since the Tax Cuts and Jobs Act took effect in late 2017, but divorcing couples are among those who have tried to beat the clock before new taxes are implemented next year.
An interesting point of discussion that will be present during negotiations involves the Head of Household (HOH) status. The tax reform policy allows HOHs to save money through bigger deductions from their filings, if they meet specific requirements.
An HOH filer will be eligible to an $18,000 deduction in 2018. Being an HOH would be better than a Single filer, but you need to pay for the majority of household expenses and live with dependents for most of the time. There could only be one HOH in a family with one child.
If you live in Colorado, consider hiring a Littleton-based divorce lawyer or a similar professional in Aspen, which is the divorce capital of the state. The demand for lawyers consequently becomes more noticeable in the city than anywhere else in Colorado.
Childless couples who want a divorce have wanted to streamline their negotiations before 2019. Cases filed by next year will be more complicated since paying spouses will no longer be able to deduct alimony from their taxable income.
Receiving spouses would not have to pay taxes, but the changes mean that they would effectively receive a smaller payout. Those who pay alimony after this year would unlikely be willing to pay more even if it’s a reasonable amount, which makes divorce in the future more difficult.
You need to strike a balance between rushing settlement negotiations to avoid higher costs next year and getting the reasonable end of the bargain. An expedited divorce, however, would require your spouse to be cooperative.