With the start of the new year, there has been much publicity and debate over the new tax laws in place across the nation. When a Missouri couple is contemplating a divorce, they should be aware of these new federal tax laws, which may impact how and when they decide to get divorced. Although these new laws primarily affect the wealthier sector of America, tax laws in general should always be considered by a couple when they are going through the divorce process.
The new federal tax laws have lowered the earning threshold for married couples to be subject to additional taxes, compared to what they would pay if they were single. As of December 31st, if a couple is not officially divorced, they have the option to still file jointly. Generally, it is preferable for divorcing couples to file their taxes jointly while going through the divorce process. However, with the earning threshold being $200,000 for a single taxpayer, but $250,000 for a married couple, wealthier couples should take into consideration the new tax laws before filing their taxes jointly while their divorce is pending. Filing jointly and making over $250,000 as a couple will subject the parties to an additional 0.9% Medicare tax on earned income above the earning threshold, as well as an additional 3.8% tax on investment income when AGI is above the earning threshold. For more information, please see the Patient Protection and Affordable Care Act.
Additionally, the rate has increased from 35% to 39.6% on all taxable income for single taxpayers earning over $400,000, while the threshold for a married taxpaying couple is $450,000. Further, many taxpayers may be losing more itemized deductions and personal exemptions, where the single taxpayer threshold is at $250,000 but the married couple threshold is at $300,000.
What If the New Federal Tax Laws Do Not Affect Me?
Even when Missouri couples are not earning such a high income to be subject to these new tax laws, there are still several considerations they must make in regards to filing their income taxes. Such considerations include maintenance payments, child support, property division and items relating to the marital home. Generally, it is recommended that divorcing couples file jointly as long as they can in order to share the dependent exemptions, deductions and credits to best benefit both parties. These benefits include claiming the children of the parties as dependents, the mortgage interest deduction and child care credit.
If the parties choose to file their tax returns separately while their divorce is pending, the same considerations remain as to maintenance payments, child support, property division and items relating to the marital home. If one party is making maintenance payments, i.e. alimony, to the other, that paying party may deduct the payments from his or her income, while the receiving party must count it towards his or her income. As for child support, any payments made or received as child support do not count as income nor an income deduction. However, some child expenses are deductible such as certain healthcare and college expenses, as well as the child care credit available to one parent. It is important to remember that each child can only be claimed as a dependent on one of the parents’ tax returns, and that it is usually the custodial parent who is allowed to claim the children. As for the marital home, only one party may take the mortgage interest deduction.
Since there are so many important factors to take into consideration when filing your annual tax returns, it is best to speak with an experienced St. Charles Family Law Attorney to help guide you through the divorce process. Please note that this information should not be taken as tax advice on your particular circumstances and you should always contact a certified public account to answer questions particular to your individual situation.