Tax Changes That Will Impact Families Everywhere
Most people have heard that a sweeping tax overhaul has been passed by the federal government and, like anything that potentially could impact someone's pocketbook, many people are wondering how this is going to impact their financial situation. The new tax bill changes the tax code in countless ways and some changes are temporary while others are intended to be permanent. For the family looking to keep some semblance of a budget, it is important to think about how this bill is going to impact their after-tax income. There are a few different important points that families should think about moving forward when creating their budget, tax planning or when considering a divorce or other family law matter.Most get a Tax Cut Initially
What many people will like is that the tax bill provides a tax cut to almost everyone initially. This includes people who are in the bottom tax bracket all the way to those at the very top; however, what some people may not have noticed is that the tax cuts are set to expire over time. This means that some people will only get a temporary tax cut before seeing their tax rates increase.Doubling the Standard Deduction
When people are filing their taxes, they often claim a standard deduction (or a deduction that is double if they are filing jointly with their spouse). In order to simplify the tax code, the tax bill has eliminated many of the additional deductions and has simply doubled the standard deduction. When people are trying to decide whether or not to itemize, they need to figure out if their itemizations are greater than the new (doubled) standard deduction. Hopefully, many people will not have to itemize, meaning that the standard deduction doubling will benefit them. In fact, many people will simply use the standard deduction, as their situation may not qualify for the additional deductions available.State Income Tax Deductions Exist
There was a concern that the new tax bill would eliminate deductions for paying state and local taxes. Fortunately, the final bill kept in this deduction for an amount up to $10,000. That means that people should make sure not to overlook this large deduction because it could lead to people overpaying on their taxes by a significant amount. The State of Florida does not have a State Income Tax, so residents of the State of Florida will not need to be concerned with this.
The changes in the tax code may have an implication in a dissolution of marriage with respect to the equitable distribution of marital assets and alimony payments. Spousal support payments are no longer taxable to the recipient party or deductible by the paying party. It is always beneficial to someone considering divorce to consult with an experienced family attorney to understand the tax implications that may occur in a dissolution of marriage or other family law matter. Someone considering a divorce or entering into a post-nuptial or pre-nuptial agreement may also want to speak with a tax attorney to get the tax attorney’s perspective as well. Even the most experienced family attorneys are not tax experts, so it is often beneficial to obtain counsel from both a family attorney and a tax attorney. There may even be certain situations when getting advice from an estate planning attorney may be helpful to one’s matter.
After all is said and done, it is important to understand that everyone's situation is different and, therefore, everyone will be impacted by the change in the tax code in different ways. For this reason, it is a good idea to sit down with an experienced attorney to ensure that families are filing a way that acts in their best interests. An experienced family law attorney can direct someone to the other professionals that may be beneficial to one’s dissolution of marriage case or other family law matter.
Article updated September 18, 2020.