The new tax law has generated wide discussions on both sides of the political aisle. Regardless of your Party preference, there will be substantive changes come tax time in 2018. In addition to finding your new tax bracket, all of us will be anxious to discover whether the new standard deductions for single and married will result in a substantial individual gain or loss.
While most of us wrestle with these issues, couples contemplating divorce during 2018 need to be mindful of the impact that the new legislation can and will have on spousal maintenance. Let’s first address the status quo regarding maintenance. Until December 31, 2018 if you are the person providing maintenance and you have an executed divorce or separated agreement you can deduct the total maintenance you provide. The person receiving your maintenance payment must claim the total amount as part of his/her annual income. Effective January 1, 2019 any executed divorce or separation agreement or any agreement modified after that date to address the issue of spousal maintenance creates a new dynamic whereby maintenance or alimony payments are not deductible by the Payor and are not included as income for the receiving party.
What precipitated the change? It is impossible to penetrate the fertile minds of our esteemed legislators but it appears that one factor is to take away a tendency on the part of some to use the current law to increase their maintenance payments which are still deductible at the expense of not dipping into retirement or pension accounts. The increased maintenance payment would be deductible, and the retirement/pension account would remain untouched. This could occur in mediation where rational and understanding couples try to create the best possible agreement for themselves and their children. So, if you are considering maintenance as a part of your separation/divorce, consider the implications of getting an agreement done before December 31, 2018 and those that occur when an agreement/divorce is concluded after January 1, 2019.
Articles Related to Maintenance
- The Child Support Modification Law
- The Spousal Maintenance (Support) Dilemma in New York
- New NYS Spousal Maintenance Rules for 2016