Here’s How the New Tax Law Affects Married Couples and Spousal Support

Like many married couples, you may be thinking ahead to your tax liability for 2018. Here is a rundown of how the new tax law is likely to affect you, especially if you own a home, have a family, or are the payor or recipient of Spousal Support.

Married Couples

Changes to the allowed deductions will affect everyone when they file their 2018 taxes, whether or not they are married. State and Local Tax deductions have been capped at $10,000 for both married and single filers. To help compensate, the standard deduction for married couples has been increased from $13,000 to $24,000 in 2018. As a result, many individuals may choose not to itemize their deductions.

The mortgage interest deduction has been lowered. Married taxpayers can now deduct the interest on mortgages of up to $750,000, if the mortgage was taken out after December 15, 2017. Homeowners with mortgages taken out before December 15, 2017, are “grandfathered in,” and are still able to deduct the interest on mortgages of up to $1 million.

The deduction for home equity loan interest has been eliminated. Previously, married couples filing together could deduct home equity interest on loans up to $100,000.

The Child Tax Credit has been expanded from $1,000 to $2,000 for both single filers and married couples. That number will begin to phase-out for families that make $400,000 or more.

The Child and Dependent Care Tax Credit and the Adoption Tax Credit have not been affected.

Major changes to the Spousal Support deduction

The Spousal Support deduction has been eliminated under the new tax act. Here is how that may affect you, and how you can compensate for it:

Spousal Support is no longer tax deductible to the payor, nor taxable to the payee. Is there a workaround for the payor? Yes. The payor could choose to pay spousal support with retirement money, so that the payor does not have to pay taxes, but the payee still does. Also, if the parties equally own a home, the payor could make mortgage payments and pay a third party (holder of the note) instead of paying support payments to their ex spouse.

Learn more

Want more to learn more about how the new law is likely to affect you, and tax strategies you might want to consider if you are paying Spousal Support? Attorney Christina Sherman holds a Masters of Laws in Taxation. Please contact our office for a consultation.

Attorney Christina Sherman is a Marin County CA family law attorney and Certified Family Law Specialist, specializing in divorce, child custody and support, marital contracts and other family law issues.

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