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How might the new tax law change my divorce?

The beginning of a new calendar year is a common time for couples in California to decide to end their marriages. They have made it through the holidays when keeping marriages together for the sake of larger family gatherings may be important and are now focused on their relationship and future. If you are in this situation, this year puts a new twist on how you might negotiate your divorce agreement thanks to the new tax laws that went into effect January 1.

As reported by CNBC, the shift in tax responsibility on money paid in spousal support from the recipient to the payor may force couples to rethink agreements that include alimony payments. Some people might initially think that this change would be positive for the spouse who would receive alimony but the reality is that instead of reducing their tax burden, it might just reduce their income.

The ability to get a tax deduction helped many spouses agree to making alimony payments in the past. Without that, these spouses may not be willing to pay alimony or to pay as much as they would have previously since they also must pay the taxes on the money. Divorce settlement conversations may need to get creative about how to split retirement accounts or other assets to come to an agreeable divorce. 

This information is not intended to provide legal advice but is instead meant to give residents in California some details about how the new Tax Cuts and Jobs Act may dramatically influence their divorce negotiations and final settlement.

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