Prior to the new Tax Cuts and Jobs Act (TCJA) of 2017, support payments that qualified as alimony could always be deducted by the payer for federal income tax purposes. Similarly, the recipients of alimony always had to report the payments as taxable income. This created a situation where parties negotiating a potential settlement,
or parties already under an alimony obligation were careful to structure their obligation in a way to maximize the benefits to both parties. For agreements entered into prior to January 2019, this law will remain the same. If you have any questions about your pre-2019 alimony obligation and its tax status, you should discuss these with your family law lawyer sooner than later.
For alimony obligations that arose by agreement or final judgment subsequent to December 31, 2018 and going forward, alimony obligations are no longer entitled to be deducted, and recipients no longer have to claim them as income. For individuals who will have to pay alimony, this change can be
very expensive as the tax savings from being able to deduct alimony payments can often be substantial.
Should you have any questions concerning your alimony obligation, or your receipt of alimony, please contact us at your earliest convenience.