THE END OF ALIMONY AS WE KNOW IT

For 75 years, alimony (also called maintenance) has been tax deductible to the payor and taxable income to the recipient. That is, the person paying alimony to an ex-spouse got to deduct it on his or her income tax returns, and the person receiving it had to declare it as income on his or her returns and pay taxes on it. That all changed on December 22, 2017, when President Trump signed the Tax Cuts and Jobs Act (“TCJA”).

Effective January 1, 2019, alimony will no longer be deductible. For agreements signed prior to that date, it remains deductible.

The practical effect of this change will make it harder to settle divorce actions. Typically, the fact that the payments were deductible softened the monetary blow to the paying party. Now, however, that carrot is gone.

It will be interesting to see how this plays out in New York. The legislature recently amended the maintenance statute to provide for a formula for paying maintenance. Implicit in that formula was the fact that maintenance would be deductible. Now that it will not be, the legislature may have to revisit the formula. Even if it does not however, the trial court has the option to deviate from the formula and consider the tax aspects.