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Now that the new tax bill has become law, you may be wondering how those changes affect your current divorce agreement or final judgment of dissolution of marriage. If you enter or entered into a divorce agreement wherein you are paying alimony that is taxable to your ex-spouse and deductible by you, your alimony agreement is not changed by the new law. This law affects new alimony agreements entered into after January 1, 2019. If you entered into an agreement before January 1, 2019, and you modify the alimony portions of that agreement after January 1, 2019, then you will no longer be able to deduct the alimony expense you are paying. If you are paying alimony and need to modify that amount, 2018 is the year to modify. Your new alimony amount can still be taxable to your ex-spouse and deductible by you if you make those changes before January 1, 2019.

The other major change that affects your divorce agreement or final judgment of dissolution of marriage is the loss of the child dependency exemption which disappears for tax year 2018. The child tax credit is still available and increased from prior years, and should be designated each year depending on your income and your ex-spouse’s income. The child tax credit phases out after a certain amount of income is earned – $200,000.00 for single filers, and this credit should be designated in your divorce agreement or re-determined if your divorce agreement was silent on the child tax credit.
 
There are other changes that could affect your deductions. You should speak to your CPA before entering into any divorce agreement and understand how the changes in the tax law will affect your income starting in 2018.
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