Top 8 Changes to Family Law with the Passage of the Tax Cuts and Jobs Act with Guest Eric Rollinger
In episode 9, I talked about the Tax Cut and Jobs Act or TCJA and how the new tax laws affect alimony law. In this episode, we go more in depth with Tax Attorney Eric Rollinger. We revisit the changes in alimony law and talk about tax codes, payments ending upon death, what is considered a written instrument, and more.
We also go in depth on other changes that will affect families and everyone who pays taxes. Eric is the perfect guest to do this. He is a CPA and an Attorney at the Law Firm of Stein Sperling. He's been honored for his excellent contributions in both the legal and financial arenas. I recently caught up with Eric at an event where we were honored by the Washingtonian Magazine as top lawyers in the Washington DC area.
You can find Eric here:
Show Notes:
[04:50] Eric is a tax attorney at Stein Sperling. He does tax controversy work and litigation support work primarily in a divorce setting.
[05:38] Alimony isn't the only thing affected by the new tax laws. There are many other changes to the tax cut and jobs act or TCJA.
[06:23] The change that took place for alimony has switched who can deduct the alimony payment. Alimony is not deductible by the payor, and it is not considered income for the recipient.
[07:25] This is the only change that took effect January 1st of 2019. Most of the other changes took effect January 1st of 2018.
[08:22] Sadly making alimony not taxable is less incentive for paying higher alimony.
[09:53] Alimony payments before TCJA took effect still follow the old law.
[12:27] Alimony is a defined term in the IRS code. It has to be paid in cash and to the former spouse or on the former spouse's behalf.
[14:25] Maryland has a default law that says the payment stop on the death of the recipient.
[16:23] What qualifies as a written instrument? Defined in Section 71 subsection B. These are divorce decrees, marital settlement agreements, or agreements incident to a divorce.
[17:28] The US tax court says a written instrument doesn't need to satisfy certain requirements.
[18:52] Be careful about written exchanges with a soon-to-be former spouse.
[20:26] It's likely that prenuptial agreements don't qualify.
[24:27] Attorney's fees are no longer tax deductible. A lot of items that used to be deductible are no longer deductible.
[26:42] This tax cut expires in 2025 will go back to what the law was in 2017.
[27:22] Standardized deductions. When people don't itemize, they take the standard deduction. Some itemized deductions have been taken away but the standard deduction has been raised. It has almost doubled for most filing statuses.
[29:11] Personal and dependent exemptions have also been changed. From 2018 to 2025, the personal exemption and the dependency exemption are now zero.
[31:44] Shared custody can impact the dependent exemption. It becomes a race to file the tax return first and claim the children as your dependent. If there is a lack of agreement, whoever has more nights with the children gets to claim the exemption.
[33:34] The IRS instructions and the law may be different. The statute says the custodial parent takes the exemption.
[35:26] It's important to know who has more time with the children during the year.
[39:23] The child tax credit. The TCJA doubled the child tax credit to $2000.
[40:17]