Your income taxes have been a hot topic all year due to the changes ushered in by the Tax Cuts and Jobs Act passed in December 2017 by the Trump Administration. Tax credits and deductions relating to families and family law issues require a new understanding of how it might affect you and your tax filings.
Here are just some of the changes that may impact you and your family:
- Dependent exemptions were eliminated, AND the Child Tax Credit was increased in 2018.
The old $4,050 exemption for children no longer exists. The child tax credit was only $1,000 in 2017 but for 2018 it doubled to $2,000, for children under 17. “Married couples filing jointly who make under $400,000 per year and single individuals, head of household, or married couples filing separately who earn less than $200,000 per year, will be able to take $2,000 per child as their Child Tax Credit” according to Jeff Rose, author of Changes to the Child Tax Credit for 2019.
- A $500 Credit for Dependents Age 17-24.
Older child dependents may be eligible for a $500 credit under the new tax laws. The credit also applies for dependents who are elderly or disabled.
- Higher standard deductions.
The Tax Cuts and Jobs Act increased your standard deduction to $12,000 for single filers, $18,000 for heads of household and $24,000 for people married filing jointly. This has been a benefit to many families that may outweigh the elimination of the dependent tax exemption.
- 529 educational savings.
529 plans can now be used for tuition expenses for grades K-12 as well as for university studies.
- Changes to alimony deductions.
Changes to alimony (spousal maintenance) deductions that were included in the Tax Cuts and Jobs Act took effect on Jan. 1, 2019. Divorce attorneys were rushing their decrees to the judges for their final signatures before December 31, 2018 and in Maricopa County, additional Pro Tem (interim) judges were brought in to finalize the swell of decrees filed with the court before the law changed so that they could enjoy the now “old” spousal maintenance deduction. Now what this means is that if your divorce is finalized or you modify your alimony agreement on or after Jan. 1, 2019, then alimony payments cannot be deducted from taxable income for 2019. And if you are receiving alimony, it should not be reported as part of your taxable income for 2019.
While changes to the Child Tax Credit may save you money on taxes in 2019, other changes may offset those savings. It’s always wise to consult a tax professional about your specific situation. Consultation with a family lawyer may help you understand and minimize tax impact of alimony, child support or dependent care concerns.
Contact McMurdie Law today to schedule a consultation to discuss your specific situation.