Implications of the Most Recent Tax Code on Child Support

Linden Family Lawyer serving clients with child support claims across Union County

Implications of the New Tax Code on Child SupportNew Jersey law regarding child support boils down to the fact that both parents have a financial obligation to support their children. However, that is where the simplicity ends on this often complicated and contentious issue. The Tax Cuts and Jobs Act of 2017, it seems, has done more to make a confusing issue even more so and brought fundamental changes to the way child support, as well as alimony, are handled for tax purposes. These are changes that you need to know about.

Attorney Edward S. Cooper has guided countless clients through child support proceedings in his nearly 25 years of practice as a New Jersey family law attorney. His experience with a vast array of child custody and support issues allows him to provide the best possible representation to his clients. To discuss your unique needs and situation with Mr. Cooper, contact him at 908-481-4625. Initial consultations are always provided free of charge.

How The Tax Cuts and Jobs Act Affects Child Support and Alimony NJ Child Support Attorneys

The Tax Cuts and Jobs Act presents some major changes that will significantly impact couples going through a divorce. Under the TCJA the personal/dependent exemptions for federal taxes has been eliminated. This is significant both for existing agreements/orders to pay child support, as well as future agreements and orders.

Existing agreements and orders usually contain provisions establishing which parent may declare the minor children as personal/dependent exemptions on their tax returns. In the past, the IRS permitted parents to negotiate between themselves who would be entitled to declare these exemptions, as long as they both did not.  This bill means billions more in revenue for the Federal Government but will also mean billions in lost revenue for individuals.

Furthermore, the bill brings major changes to divorcing couples is who pays taxes on alimony. In the past, the spouse paying alimony is allowed to take the deduction, while the one receiving payments is taxed according to their individual income.

The new tax law makes essentially reverses this making alimony non-tax-deductible for the one paying, and the one receiving alimony will not pay tax on it. It is important to note that this new law applies to divorces that are finalized after Dec. 31, 2018.

Fundamental Changes For Couples Divorcing in New Jersey Following the New Tax Code

The Tax Cuts and Jobs Act of 2017 made numerous noteworthy changes to the individual income tax, including modifications to documented deductions and the alternative minimum tax, an extended standard deduction and child tax credit, and lower marginal tax rates across sectors.

Three Provisions to Decrease Household Income Merged Into Two

The three provisions that decrease household income taxes grounded on household size were merged into two: the personal exemption was disregarded, replaced by the previously mentioned extended standard deduction and an expanded child tax credit. The new tax code has helped alleviate some complexity by eliminating the personal exemption, which would have been $4,150 in 2018, and expanding the child tax credit.

Child Tax Credit Doubles

The child tax credit doubles ($1,000 to $2,000) per qualified child below the age of 17, with up to $1,400 refundable. It also has increased the income level at which the reducing of the credit begins, ($110,000 to $400,000 for married jointly filed households). These two elements broaden both the value of the credit as well as the number of individuals eligible to claim the credit.

Child Support Guidelines Tool

At the moment the child support guidelines is a common tool used for separating and divorcing parents. However, they still do not include the new primary changes to the tax code and in turn, the Guidelines’ withholding tables no longer reflect tax liabilities as they are based on 2017 withholding rates.

Subsequent to the broad nature of this new tax law, the change in the tax law will unquestionably lead the courts to render legal decisions as the courts and legal system integrate these significant changes. In addition to consulting your tax professional, it is essential to contact an experienced attorney to help you understand these changes.

Contact a Union County NJ Child Support Attorney

Understanding this new legislation alongside with its effects on child support can be arduous. Having an experienced advocate on your side can offer you peace of mind while ensuring that each side of your case is effectively resolved. Contact Edward S. Cooper to discuss your individual case free of charge with the knowledgeable family law attorney at his Union County offices at 908-481-4625.