Proposed Changes to Federal Tax Code and Impact on Divorce and Support Cases

The federal government is currently considering broad changes to the federal tax code which, if passed, will have a great impact on how federal income taxes are calculated and the amount of federal income taxes individuals have to pay. If these changes are passed, the impact will be reverberate to divorce and support cases in Pennsylvania, as a parties’ net income after taxes is very important in determining the amount of a support order and how assets are divided in a divorce. 

While no changes have been finalized as of the writing of this article, the following proposed changes would likely have a significant impact on divorce and support cases if the changes come to fruition:

• Reducing the current seven tax brackets to three or four brackets. Currently, there are 7 tax brackets, which may be reduced to 3 or 4. The new tax brackets would be a 12% bracket, a 25% bracket, a 35% bracket, and possibly a 39.6% bracket.  These proposed changes in the tax brackets could have a significant effect on the calculation of net income for support purposes, especially in high income cases if there are only 3 tax brackets.

• The increase in the standard deduction, along with the elimination of most itemized deductions and personal exemptions. A key component of the current tax plan would result in approximately doubling the standard deduction while at the same time, eliminating most itemized deductions (except for perhaps the mortgage interest deduction and the charitable contribution deduction), and eliminating personal exemptions.  Parties with many children may be affected by the elimination of personal exemptions.  However, if the child tax credit is also increased, this may lead to more discussion regarding who may claim the children for tax purposes at support conferences.

• The elimination of the Head of Household tax filing status. Along with reducing the number of tax brackets, the current tax plan calls for a reduction in the number of tax filing statuses, including the elimination of the Head of Household status.  The Head of Household status is often used by separated or divorced individuals who have dependent children.  Any change or elimination of this tax filing status will likely have a significant impact in support cases.

If you have a divorce, support, or tax case, you should seek legal counsel. If you need advice in any of these areas, contact one of the experienced family law attorneys at Trinity Law today. Our attorneys routinely handle Pennsylvania family and tax law matters in York, Lancaster, and surrounding counties.