“Tax Exemption Questions”

TAX EXEMPTIONS QUESTIONS

In my divorce I bargained to receive the tax exemptions which the Tax Reform Legislation of 2017 has cancelled.  What do I do now?

The Tax Reform Legislation passing in 2017 is the most sweeping tax legislation to be enacted since 1986 and will impact divorce cases as well as planning in profound ways.

The Act eliminates personal exemptions after 2017 for most tax payers.  This change may have a significant effect on Divorce Judgments that have already been entered. In any divorce case, it is common that this benefit was likely bargained as a trade-off for another concession. If one spouse was to claim the exemptions for all the children, and counted that estimated tax benefit in the divorce negotiations, and is now receiving a zero benefit in exchange for whatever was given to the other spouse; this may be perceived to be an unfair result. Or, in other words, A RIP OFF.   

Whether that is a basis to revisit or adjust the Divorce Judgment or agreement is a question for the Courts.  For example, the custodial parent may have agreed to give up a portion of the marital assets in exchange for receiving the benefit of the exemptions for several children for all future tax years.  Under the prior tax code, that benefit could be calculated with a reasonable degree of certainty and off-set may have occurred up to an amount of thousands of dollars.  The questions facing the party who received the, now worthless, exemptions is whether a court would determine it is appropriate to adjust the terms of the agreement or Judgment as the person with the exemptions is no longer receiving the benefit of their bargain.   

The parties negotiated in good faith to claim exemptions that have now been legislated away.  The question is whether the parties have any recourse. An aggrieved party may wish to file a Motion with the Court that entered the Divorce Judgment seeking some form of economic relief for the years that the bargain they made is now lost.

If you find yourself in a situation where you have lost the benefit of your bargain with regard to tax exemptions, or you have further questions about this, or other issues related to your Divorce,   assistance is available through one of our Divorce attorneys at Damon, Ver Merris, Boyko & Witte, PLC.  Please contact us at (616) 975-9951. We are here to help.

– Curtis R. Witte  /  March 12, 2018.

While this posting originates from a law office, none of the contents should, in any way, be considered legal advice. If you have not signed a retention letter describing the legal services to be provided and the amount to be paid for such services, you are not a client of this firm.