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Tax law changes affecting child support, exemptions and alimony

Parents in Maryland who are planning to get a divorce will soon have to do so without the added benefits of certain personal and dependent exemptions. This is because the Tax Cuts and Jobs Act (TCJA) will have a noticeable impact on child support and alimony when it officially goes into effect starting in 2019. In addition to cutting the value of certain exemptions, the TCJA increases standard deductions across all filing status options, including single and Head of Household (HOH).

Due to the considerable increase in HOH deductions, being able to claim HOH status after a divorce can be especially beneficial for a newly single parent under the TCJA. To be eligible to claim this tax filing status, a newly unmarried individual must be responsible for paying for more than half the household expenses. A dependent child must also live with an HOH filer more than 50 percent of the time. The added significance of being able to claim HOH status instead of single could make settlement negotiations more contentious if both parents wish to be able to do so.

The head of household filer will also be able to claim an expanded $2,000 Child Tax Credit that will be available under the TCJA. Under the new tax law, tax credits will have more significance since exemptions will no longer reduce taxable income. It's also not clear if parents will be able to continue to take turns claiming the Child Tax Credit, which was possible under previous tax regulations. From January 2019 forward, alimony will no longer be deductible for payors or claimable for recipients.

A family law attorney who is familiar with the TCJA may be able to help a client ending a marriage determine the most efficient way to structure a settlement agreement during the negotiation process to offset tax consequences. If circumstances involved with child support or alimony change following a divorce, an attorney can take steps to make appropriate post-divorce modifications. Doing so could result in changes with tax obligations and filing status designations as per TCJA guidelines in a way that may be favorable for the client.

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