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How new tax laws could change retirement for divorced people

The passage of the Tax Cut and Jobs Act will bring about a number of changes that may affect people in Georgia during their divorce. One of those changes is that alimony will no longer be taxed or tax-deductible. This means the alimony recipient may have a low reported income and benefit more from investment assets in the divorce than from keeping the home because he or she may qualify for a capital gains tax rate of 0%.

Another change is in the $10,000 tax deduction cap for state and local taxes. This may make home ownership less appealing. A better option for some divorced people may be to rent and claim the standard deduction. People should also be aware that the child tax credit has changed.

Divorce often leaves people with a lower standard of living, and the rise in divorces of people over the age of 50 means they could also be ill-prepared for retirement. Some people may be able to draw some Social Security benefits on an ex-spouse's earnings. The National Retirement Risk Index developed Boston College's Center for Retirement Research found that households that have been through a divorce have a higher likelihood of struggling more in retirement than households that have not.

People may want to keep these points in mind as they negotiate property division in a divorce. Individuals can talk to their attorneys about how the new laws might specifically have an impact on their situation. In a high-asset divorce, there may be additional considerations as well, such as what to do if one or both spouses own a business. Child custody and visitation may also need to be negotiated as a separate issue from property division. Sometimes the custodial parent wants to keep the home to increase the children's sense of stability, but this should be weighed against the considerations described above.

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Hecht Family Law
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