Ohio residents who are getting a divorce should be aware of how the passage of the Tax Cuts and Jobs Act will impact divorces that are finalized on or after Jan. 1, 2019. There are provisions that affect exemptions, deductions, federal tax rates and Alternative Minimum Tax limits. However, divorcing couples may be most interested about the changes that will impact alimony and child support.

For people whose divorce agreements are signed after 2018, alimony will no longer have any income tax consequences. Beginning in 2019, it will be treated as a simple transfer of property to be conducted according to divorce settlement terms. Divorcees who will have to pay alimony will no longer be able to deduct the amounts of those payments from their taxable income. Divorcees who receive alimony payments will not have to include those amounts as part of their taxable income.

While it may seem that the change in the tax law may be beneficial for divorced individuals who will be receiving alimony, it may put alimony recipients at a disadvantage. Because individuals who have to pay alimony will no longer be able to benefit from the reduced taxes that comes with lowering their taxable income by the amount of alimony they are required to pay, the amount of alimony awards are expected to be lower in the future.

The TCJA also does away with the dependent and personal exemptions while increasing the amounts of the standard deductions. This means that divorcees will be able to obtain incremental savings if they are able to file as the head of the household.

A divorce attorney may work to obtain favorable divorce settlement terms for clients. The attorney may discuss how the changes in the tax law are a factor in the settlement terms that should be pursued.