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Changes in tax laws could complicate contested divorce filings

There has been much media attention paid to some of the changes that were recently made to the tax codes in the country. While part of the focus was on how alimony payments may be affected by the new laws, there has been little reporting on how other changes could lead to a rise in contested divorce filings. Now, some financial professionals claim that states such as California may see an increase in the number of filings over the next few years.

According to one financial expert, the changes in the amounts and types of tax deductions could have a significant impact on married couples who are in a higher tax bracket. These couples are now limited in the amounts they can deduct in several areas, including deductions for state and local taxes as well as mortgage interest payments. Likewise, other changes may lead to increased pressure in already troubled marriages.

Tax advisors have often referred to the so-called "marriage penalty" that was a part of the old tax laws. This penalty has now purportedly been increased due to the lack of offsetting deductions that wealthier couples could claim. While the increase in taxes was not previously considered a potential factor in avoiding marriage, some couples may now choose to either untie the knot or at least file separately to offset some of the higher tax liabilities.

The changes in the tax codes do not have a significant impact on lower-earning couples or in a marriage where this is a wage disparity. However, for some couples, the loss of deductions could result in a much heftier tax burden. Furthermore, the change in the alimony laws may also lead to those couples who are facing a contested divorce to struggle even more to arrive at an agreeable settlement. California residents who are concerned about how these changes could impact their dissolution may be best served by consulting an attorney who is well-versed in how current state and federal laws can impact one's financial well-being both during a divorce and after the final decree.

Source: Fox Business, "How Trump's tax code could lead to a rise in the divorce rate", Brittany De Lea, Mar. 1, 2018

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