The Tax Cuts and Jobs Act: Divorce Agreements

     It’s not an overstatement to say that the Tax Cuts and Jobs Act is going to affect just about every area of life. When it goes into effect next year, there will be many changes we all will have to get used to. One drastic change will be regarding divorce agreements. Currently, alimony can be deducted by the payor, and is taxed as income for the payee. Starting in January 2019, that will no longer be the case.

     This will create a benefit for one person in the divorce proceedings. However, another concern will be the dividing of assets. When considering the valuation of business interests, the old ways of making those calculations are over! Many of these businesses are now considered “pass-through entities”. This means more cash will be going through them for tax purposes and modern accounting methods must be applied to adjust to the times we are living in.

      The more we investigate the TCJA, the more we can appreciate how monumental the law is. The way divorces were handled before are now going to be a thing of the past. These are exciting times as we move ahead to find out what the future has in store.

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