Colorado residents who make alimony payments get to take a tax deduction for the amount paid. For divorces that are finalized starting in 2019, however, alimony will be treated like child support. The person who makes the payment won’t receive a tax deduction while the receiver won’t count it as income. There will also be changes for parents who get divorced in the near future.
From 2018 to 2025, the child dependent deduction has been suspended. However, custodial parents can take advantage of the expanded Child Tax Credit (CTC) that is classified as a refundable tax credit. This means that it’s given out even if a recipient’s tax liability dips into negative territory. The Tax Cuts and Jobs Act (TCJA) also provides incentives for parents to use 529 educational savings plans. Prior to the TCJA, money in such accounts could only be used for approved college expenses.
Now, parents can take out up to $10,000 for tuition at the elementary and secondary level. Since it offers tax advantages for those who make contributions, it may be an ideal way for a divorced parent to pay educational expenses while getting a tax break. As a general rule, divorcing couples are urged to work together to maximize tax benefits now and in the future.
Those who are getting divorced may have many financial issues to resolve. By working with an attorney in Colorado, however, an individual may be able to come to a favorable agreement as it relates to alimony or child custody. By obtaining custody of a child, it may be possible to receive child support payments or obtain credits on a tax return. Divorce cases may be resolved through mediation or by asking a judge to make a ruling.