Alimony and the New Tax Laws
When Congress passed the Tax Cuts and Jobs Act in December 2017, one of the major changes was to alimony. Under the new Act, alimony payments will not be tax deductible for the payor spouse, and alimony will no longer be considered gross income for the recipient in divorces and legal separations that are executed on or after January 1, 2019. This new alimony provision is not retroactive and does not apply to divorces and separation agreements entered the new law takes effect.
If a party wants to have alimony be deductible or taxable, the divorce agreement must be finalized by December 31, 2018. It is important to emphasize that the prior rules will apply to already-existing divorces and separations as well as divorces and separations that are finalized before 2019, even if those agreements are legally modified after January 1, 2019. However, under a special rule, if taxpayers have an existing (pre-2019) divorce or separation decree legally modified, they can expressly choose to apply the new Act rules in the modification.
It is important for parties and lawyers to act quickly if they want to take advantage of the exclusions before the new tax law takes effect. If you have questions about the new tax law, please contact the Law Office of Laurie M. Wasserman LLC at 410-842-1070 or email@example.com. We practice in jurisdictions throughout the State of Maryland.