If you are starting off the new year facing a divorce in New Jersey, you will no doubt have a lot of questions. A divorce is a legal event and therefore, there are many laws that will influence the decisions you and your spouse will make as you work through the details of your divorce agreement. This year, some of these laws have changed thanks to the Tax Cuts and Jobs Act.
As explained by CNBC, no longer will the person paying spousal support deduct this money from their tax return. They will now be the one responsible for paying income tax on the money instead of the person who receives the funds. For the receipient spouse, this change may impact them in a few ways. First, they may end up with less money in alimony than they would have previously as the paying spouse will end up with less money to pay out at alimony once they factor in the tax liability.
Second, some retirement accounts may only be funded with earned taxable income and, going forward, spousal support will not fall into this classification for a receipient spouse. This change then actually might reduce a receiving spouse’s options for saving for their retirement.
This information is not intended to provide legal advice but is instead meant to give divorcing residents in New Jersey some idea of the options they might review with their legal counsel while negotiating a divorce settlement now that the new tax code has gone into effect.