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Tax Reform Changes Related to Marriage and Divorce

The recently enacted Tax Cuts and Jobs Act (TCJA) made changes affecting both married and divorced couples. 

For the tax year that began January 1, 2018, the standard deduction for married couples filing jointly almost doubled to $24,000. The standard deduction for married couples filing separately similarly increased to $12,000 each. The highest tax rate for married couples filing jointly went down to 37% for taxable income over $600,000. The highest tax rate for married couples filing separately similarly dropped to 37% for taxable income over $300,000.

Alimony was traditionally a deduction to the payor and income to the payee. The TCJA eliminated the tax deduction for alimony payments. Importantly, the new rules will not affect couples who either enter into a written separation agreement or obtain a judgment of divorce prior to January 1, 2019. The prior treatment of alimony will continue for those couples. But for written separation agreements or judgments of divorce obtained subsequent to December 31, 2018, alimony will no longer be a deduction for the payor or income to the payee. The TCJA treatment of alimony payments may also apply to payments pursuant to pre-December 31, 2018 divorce or separation instruments if they are modified after December 31, 2018, and the modification specifically states that the TCJA treatment of alimony payments will apply.

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