Michael E. Eisenberg
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Montgomery County Family Law Blog

Planning for taxes after divorce

Pennsylvania parents who decide to divorce may consider many factors relating to how the end of the marriage might affect the parent-child relationship. From child custody and visitation to negotiating an amicable co-parenting framework, divorcing parents do a great deal of work to prepare for their future. One issue that people may not consider immediately is how the divorce might change their tax filings.

Of course, people who divorce must now file their taxes as single rather than jointly as a married couple. In addition, only one parent can claim each child as a dependent per year. This can be important because it provides access to key tax credits like the Child Tax Credit, the Child and Dependent Care Tax Credit and the Earned Income Tax Credit. After the changes to tax law introduced by the Tax Cuts and Jobs Act, these credits are more important than ever to achieving important tax savings. In addition, a parent who can claim a child as a dependent can file using Head of Household status.

Red flags for hidden money during a divorce

When a marriage in Pennsylvania begins to hit rocky waters, financial secrets can begin to grow. Some of these hidden finances can be especially troubling during a divorce, where they may originate as an attempt to deny a spouse his or her fair share of marital property. While many people are able to end their marriages without recriminations or schemes, it is important for individuals going through a more high-conflict divorce to be aware of red flags that could point to hidden funds or other financial secrets.

When one spouse's spending habits suddenly change, this could point to someone squirreling money away in a hidden account. It could simply point to new hobbies, but it can also be an indication of an extramarital relationship. Affairs can be costly, involving dinners out, hotel rooms or gifts. Some people may rent a second apartment or otherwise take on large expenses when conducting a secondary relationship. These kinds of financial changes can indicate a number of troubling problems that could indicate the end of a marriage.

All about prenuptial and postnuptial agreements

Generally, it is not possible to directly modify a prenuptial agreement, or PNA, during a divorce. However, it may be possible to change certain agreed-upon instruments with the aid of a legal document called a postnuptial agreement. By securing the representation of a Pennsylvania attorney who has knowledge of family law, a person may gain a better chance of resolving problems stemming from onerous or unfair PNAs.

Although the prenuptial agreement is often considered immutable and sacrosanct by many laypeople, the truth is far more nuanced. In reality, many people have been surprised to find how unenforceable their PNAs ultimately proved to be. It is common for events to evolve far differently than expected when drafting a contract like this.

How dads can overcome custody bias

It’s not uncommon for men to feel like the courts favor women in custody battles. This bias stems from our culture’s roots — when women were not able to work, but instead cared for the children and the home.

Today, however, these ideas are recognized as dated and sexist. If you believe the courts may hold a bias against you for being a man, following these tips can help you prove your dedication as a father.

Setting up a parenting schedule

As anyone in Pennsylvania who's had their marriage dissolved knows, divorce can be an arduous process for the parents and even more for the children. It involves breaking up a family and permanently changing a living situation that the children had grown accustomed to.

Given how unsettling the whole divorce process may be for the young ones, parents should do everything in their power to make the transition as smooth as possible. For starters, parents would do well to put themselves in their kids' shoes and ask themselves how each decision they make during the divorce affects their children. Additionally, when setting a parenting schedule, parents ought to take into account the children's school schedule as well as any other activities the children may be involved in; at the end of the day, what matters most is to minimize the disruption felt by the kids. In the same vein of minimizing disruption, it behooves parents to think about the logistics of their children's lives, especially if both parents will live far apart from each other.

The role of money in a divorce

Pennsylvania residents who are married for the first time have a roughly 50/50 chance that it will last forever. The odds of success are lower for second and subsequent marriages. However, there may be compelling financial reasons to avoid a divorce if possible. For instance, married couples who own a home will need to figure out what to do with it. While a person could keep the home, it can be hard to maintain it on one income.

Selling a home may not be ideal either as buyers know that they have the advantage when it comes to negotiating the price. Moving costs and market conditions will also need to be considered when selling a home. There are also costs to consider when it comes to getting professional help in a divorce. Accountants, attorneys and others involved in the matter will all charge for their services. Individuals who choose to represent themselves to save money could make mistakes that have long-term negative consequences.

Is asking for a change in child support payments selfish?

Divorced parents are encouraged to cooperate with each other in the interest of their child’s development and overall happiness. If you are working toward a positive co-parent relationship with your ex, or have already established one, you may worry that “stirring the pot” could mess everything up.

On the other hand, if you’re unable to make ends meet with the current child support amount, you may not have a choice but to seek a modification.

Managing divorce with new tax rules in mind

Starting at the beginning of 2019, couples filing for divorce in Pennsylvania and throughout the rest of the United States will have to do so with tax rule changes in mind, particularly if spousal support will be involved. This is happening because the Tax Cuts and Jobs Act (TCJA) changes how alimony is handled for tax purposes. Under the new law, alimony will not be tax-deductible for the payor, and the recipient won't be required to report it as taxable income.

If divorce proceedings were started at the end of 2018, it's likely already too late to beat the clock unless a final agreement or court order referencing alimony was already prepared or issued. Since mortgage interest deductions are currently capped at $750,000 instead of the previous $1 million, and local and state income taxes are now capped at $10,000, a divorcing spouse may also want to consider what tax advantages might be associated with ownership of the marital home.

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Michael E. Eisenberg Attorney At Law

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