Client Alert: New Tax Bill Repeals Alimony Deduction

By Gregory N. Hoffman and Rui P. Alves

What is alimony?

Black’s Law Dictionary defines alimony as a court-ordered allowance that one spouse pays to the other spouse for maintenance and support while they are separated, while they are involved in a matrimonial lawsuit or after they are divorced.  Prior to the passage of the new tax bill, alimony payments were tax deductible by the payor spouse and taxable income to the recipient spouse.  However, with the passage of the new tax bill, the alimony landscape has been turned upside down.

 Impact on payor spouse

The new tax bills provides, in pertinent part, that alimony payments are no longer a deductible expense.  As a result, payor spouse’s income will increase.  This may result in a number of consequences including, but not limited to, causing payor spouse to be in a higher tax bracket.  In order to fully understanding the consequences of no longer be able to deduct alimony payments, you should consult with a qualified tax professional.

Impact on recipient spouse

Under the new tax bill, alimony payments are no longer included in recipient spouse’s gross income.  Rather, alimony payments will be taxed at the payor’s rate.  As a result, recipient spouse will receive more disposable income to be used for their maintenance and support.

Effective date

Per the terms of the new tax bill, the new tax rules regarding the alimony deduction apply to any divorce or separation agreement executed after December 31, 2018.  In addition, the new tax bill provides that the new alimony tax rules apply to modifications of any divorce or separation agreement executed prior to December 31, 2018 if the modification itself occurs subsequent to that date and expressly provides that the amendments made by the new tax bill apply to such modification.

Implications

The sweeping changes to the tax treatment of alimony payments affect not only divorce and separation instruments but also antenuptial and postnuptial agreements.  As a result of the above-referenced drastic changes to the alimony tax scheme, it is critical that individuals consult with qualified attorneys and tax professionals in order to avoid consequences or reap the benefits of the new tax bill.

For more information or to determine what steps should be taken with respect to your alimony support obligation or award, please contact Gregory N. Hoffman at ghoffman@bglaw.com and Rui P. Alves at ralves@bglaw.com or by phone at 888.273.9903.

Gregory N. Hoffman focuses his practice on complex family law, criminal law and general civil litigation. He actively practices in the courts of Massachusetts and Rhode Island litigating cases such as divorce, child custody, child support, domestic violence, criminal defense and personal injury.  In addition, Greg devotes a significant amount of time developing comprehensive and cost-effective solutions in the drafting of a variety of domestic relations agreements such as Separation Agreements, Marital Settlement Agreements and Antenuptial Agreements.

Rui P. Alves is an experienced Rhode Island and Massachusetts litigator and advocate in family law, criminal law and government relations matters in both state and federal court. Rui concentrates his practice on helping individuals and corporations craft solutions for complex issues related to domestic relations, criminal defense and government affairs.

About Barton Gilman

Barton Gilman is a leading civil litigation law firm with offices in Boston, Providence and New York. Our experienced attorneys represent a variety of clients in a wide range of matters, and our trial attorneys appear regularly in the federal and state courts of Massachusetts, Rhode Island, Connecticut, and New York, as well as before various administrative agencies. Barton Gilman and its attorneys have received numerous awards and accolades, including 2018 Champions for Justice, 2015 Outstanding Philanthropic Business, Best LawyersBest Law FirmsBest Places to Work Rhode Island, and Super Lawyers, to name just a few.