Those in Charlotte who follow the goings-on in Washington politics are probably aware that Congress recently passed a comprehensive tax overhaul.
No matter how one feels about them personally, it is important for North Carolina residents to understand what the consequences of these changes in federal tax law are, particularly if they are in the process of a divorce.
By way of example, one of the biggest, and most controversial changes, is that for divorces finalized after December 31, alimony will no longer carry tax consequences. That is, a person who is receiving alimony will not have to claim it is income on his tax returns, and a person who is paying alimony will not be able to deduct the payments off of her tax returns.
This a profound change in the way federal law treats alimony payments for income tax purposes. Depending on one's situation, it may be a good idea to fight hard to get a pending divorce finalized before the end of the year in order to take advantage of the current tax law, which allows those who pay spousal support to deduct those payments.
This may not be the best approach in all cases. Moreover, this late in the game, it may as a practical matter not be possible to get a divorce finalized before the December 31 cutoff. Still, someone who is poised to agree to an alimony payment needs to remember that he will not get a credit on those payments in the form of a tax deduction. This may mean he will need to press for a lower payment than what he originally thought he could afford. An experienced North Carolina family law attorney can offer advice specific to one's circumstances.