If you are a “high-net-worth individual” (for lack of a subtler term) who plans to divorce in 2025, know that preparing for the tax realities of 2026 is likely going to be an important effort when it comes to protecting your financial interests.
With the Tax Cuts and Jobs Act (TCJA) set to sunset at the end of 2025 unless Congress extends it, the 2026 tax year may feature significant changes to income brackets, deductions, estate tax thresholds and alimony treatment. As such, understanding how these changes may impact future tax obligations can be consequential as you strive to make informed decisions during your divorce settlement negotiations.
Particularly pressing considerations
One of the most notable potential changes that you may need to factor into your divorce settlement strategy concerns alimony. Under the TCJA, alimony payments from agreements finalized after December 31, 2018, are no longer deductible by the payor and are not counted as taxable income for the recipient. If the TCJA sunsets, the old rules may return, meaning alimony could again be deductible to the payor and taxable to the recipient. If you’re negotiating support terms in 2025, it’s important to consider whether your agreement will need to be modified in 2026 to reflect the new (or reinstated) rules. Couples may choose to include language in their divorce decree that anticipates possible tax law changes and provides flexibility for future adjustments.
Another area to watch is the individual income tax brackets. If the TCJA expires, rates will revert to pre-2018 levels, meaning higher taxes for many high-income earners. This can impact decisions about the division of income-producing assets, like investments or business interests. What may seem like a fair split under current tax rules could create unexpected tax burdens in 2026 and beyond. Couples divorcing in 2025 should model different tax scenarios for 2026 to understand the long-term impact of property division and support obligations.
Finally, filing status for the 2025 and 2026 tax years must be considered. If your divorce is finalized by December 31, 2025, you cannot file jointly for that year. Planning ahead with your accountant and legal team can help you avoid surprises and structure the timing of agreements to maximize tax efficiency.
Divorcing in 2025 while facing a potentially different tax environment in 2026 requires strategic coordination. Being prepared can help you to take anticipated changes into account and more successfully position yourself for a financially stable future.