After being passed into law in December 2017, the Tax Cuts and Jobs Act eliminated a number of deductions and exemptions, raised the Alternative Minimum Tax limit and reduced federal rates of taxation. Furthermore, this tax reform will affect the way child support and alimony are treated for Illinois residents. The TCJA gets rid of both dependent and personal exemptions and raises the standard deductions.
A parent who is newly single may have more incentive to claim the Head of Household status under the TCJA. In order to claim Head of Household, the person must be unmarried, have a dependent living in the household greater than 50 percent of the time and be responsible for more than 50 percent of the expenses of the household. After a divorce, the parent who is the Head of Household can claim the Child Tax Credit of up to $2,000 per qualifying child.
After Jan. 1, 2019, the TCJA mandates that alimony will neither be deductible by the payor nor taxable to the recipient. This represents the end of the long-established practice that gave couples who were divorcing the ability to transfer money from the higher earner to the lower earner, reducing the taxable income of the two parties together. Going forward, alimony will be a simple transfer of property with no special tax consequences. People who divorce prior to 2019 will still fall under the pre-TCJA rules unless their divorce agreements specify otherwise.
Someone who is going through a divorce in Illinois might want to speak with an attorney. A lawyer with experience in family law could provide advice regarding the taxation of alimony and child support or negotiate the terms of property division. If necessary, legal counsel can argue on behalf of the client during family court hearings.