Alimony and Trump’s Tax Plan

By | 2017-12-29T09:34:27+00:00 December 29th, 2017|Divorce, Divorce & Finances, Maintenance/Spousal Support|0 Comments

Congress’ substantial tax overhaul will affect nearly every corner of your life — yes, even your New York divorce. The tax overhaul includes a provision that removes the tax deduction for alimony/maintenance payments, that has been in effect for the past 75 years.

So, will this affect your New York divorce?

Well, the new rules will not affect anyone who signs a divorce separation agreement before December 31, 2018. For any divorce that commences after December 31, 2018, the spouse paying alimony/maintenance in New York will not be able to deduct it, and the spouse receiving alimony/maintenance will no longer pay taxes on it. The alimony/maintenance paid will be taxed at the payor’s tax rates.

Does the new tax policy seem a little backwards to you? Under current law, the opposite is true- alimony/maintenace is deductible to the spouse making payments and is treated as income to the recipient.

In summary, the current tax law is more likely to encourage payor spouses to allocate funds that help financially support dependent spouses and their transition into a new life. Under the new tax law, less money will be allocated to the recipient spouse if the payor spouse is taxed on alimony/maintenance. This may also make it more difficult to reach a reasonable alimony/maintenance settlement if the payor spouse has to pay taxes on that amount.

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