“How Do The New Tax Law Changes Affect Spousal and Child Support?”

The new tax reform has made several changes which affect child and spousal support, including one prospective change that is scheduled for 2019.

The main change is the with the new tax tables, income for most W2 wage earners has gone up a little bit. This means that guideline calculation for child support and temporary spousal support will be slightly higher than in previous years.

The second change is that the rules for tax rates for Qualified Business Income for certain self-employed individuals and small businesses allow a major reduction of tax rate for certain income ranges. This increases actual income and can increase spousal support, depending on how the taxes are filed. For people who qualify for the QBI deduction, it is very important to have a forensic accountant to determine actual income and the best way to file, or the calculation for support may be inaccurate. Having an actual CPA doing the taxes is also a must, as business income is much more complicated than under the previous rules where you simply maximized deductions.

The prospective change is that currently Spousal Support, which is normally tax deductible to the payor and taxable income to the payee, would no longer be tax deductible by the payor. This is a major change, and is scheduled to begin in 2019. However, you should be aware that some experts on tax law predict that this will either be canceled or pushed back another year. If paying spousal support may be in your future, stay tuned for that change. As currently set, all spousal support orders made before January 1, 2019, would be grandfathered in and would be tax deductible. However, these rules are not yet set in stone and there very well may be additional changes before anything happens.

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