Recent tax law affect divorces in several ways. A
significant change impacting many couples is the elimination of the $125,000
exemption from capital gains on the sale of the primary residence for persons
over age 55. It was replaced with a provision allowing a $250,000 exemption for
single individuals and a $500,000 exemption for couples. These exemptions will
be allowed on every sale and will not be limited to one transaction as the old
provision. Another change impacting divorcing couples is the educational
expense credit and life-time learning deduction. As couples decide how to
provide for their children's educational expenses and how to allocate tax
deductions for the children, they will need to consider consulting their
accountants to determine whether it would be advantageous for the college age
child of a high income couple to no longer be considered a dependent and
therefore to take advantage of the educational expense credit.