When a couple in West Virginia comes to the difficult decision to end their marriage, there are likely many questions that must be answered and issues that must be settled.

More than simply dividing assets, couples who are going through a divorce must also examine the tax ramifications of certain divisions. The process can often involve a significant amount of negotiations, but some professionals with knowledge of family law think that the recently passed plan to revise taxes could create additional complications for divorcing couples.

The tax reform changes how spousal support payments are treated regarding who pays taxes. Currently, the spouse who pays the support can claim it as a deduction, while the spouse receives it then pays taxes on it. Because typically the paying spouse’s income places him or her in a higher tax bracket, divorced couples ultimately pay less in taxes than if the roles were swapped, keeping more money within the family.

However, the tax reform has reversed the roles, with the higher earning spouse paying taxes, often meaning that the government receives more money. The move was partly prompted by the discrepancy between the number of people claiming spousal support as a deduction versus those paying taxes on such payments. While the change could add almost $7 billion in tax revenue over the course of the next decade, reports claim that this amount accounts for only half a percent of the overall tax cut plan.

Regardless of the amount of tax revenue the change could generate, it could potentially change negotiations regarding spousal support for couples in West Virginia and across the United States seeking to end their marriage after 2018. In addition to leaving families with less money, some states may have to reconsider their laws because many prenuptial agreements address such payments with the assumption that the recipient will pay taxes.

Fortunately, an attorney with experience can help couples who plan to seek a divorce determine how the changes will impact their decisions.

Source: New York Post