Skip to main content

Will the Alimony Tax Change Pressure Couples to Finalize their Divorce in 2018?

As we have previously covered here, The Tax Cuts & Jobs Act of 2017 Includes a Divorce “Penalty” for divorces that take place after December 31, 2018 if they involve alimony.  Prior to this act, and up until December 31, 2018, alimony was tax deductible to the payor and taxable income to the recipient, which allowed for a shifting of taxable income to a lower tax bracket.  If an agreement is entered prior to the end of 2018, and this benefit is preserved, then it continues into future years, even if the amount is later modified.  This has led many couples, already in the divorce process, to consider whether they want to work on finalizing their case prior to the end of 2018 to preserve this option.

Because some states, like Massachusetts, have waiting periods for finalizing a divorce, this law change raised a question:

Does the deadline of December 31, 2018 apply to the divorce being finalized, or just having a written agreement completed?

The answer to this question in Massachusetts, which has a 90-120 day waiting period for the finalization of a divorce after the Judgment of Divorce Nisi, could mean the difference between having to have an agreement done in August rather than December.  For more information about the timing of the divorce process in Massachusetts read our post: How to be Divorced by the End of the Year.

According to a recent post from local CPA firm, Gosule, Butkus & Jesson, LLP,
"The key for parties getting divorced in 2018 who want alimony to be deductible to the payer and taxable to the recipient is to have a written, signed, alimony agreement in place by December 31, 2018."
They note that the couple does not have to actually be legally separated or divorced for the alimony to be deductible as long as there is a "written separation agreement" with clear statements for support that otherwise meet the requirements for deductible alimony.  To read their entire rationale for this conclusion, complete with tax court citations, read their full article here: What Constitutes an Alimony Agreement?

Comments

Popular posts from this blog

What is the purpose of the Divorce Nisi waiting period?

In Massachusetts the statutory waiting period after a Judgment of Divorce and before the divorce becomes final (or absolute) is called the Nisi period. After a divorce case settles or goes to trial, a Judgment of Divorce Nisi will issue and it will become Absolute after a further ninety (90) days. This waiting period serves the purpose of allowing parties to change their mind before the divorce becomes final. If the Judgment of Divorce Nisi has issued but not become final yet, and you and your spouse decide you don't want to get divorced, then you can file a Motion to Dismiss and the Judgment will be undone. Although many of my clients who are getting divorced think the idea of getting back together with their ex sounds crazy, I have had cases where this happened. In addition to offering a grace period to change your mind, the Nisi period has three other legal effects: 1. The most obvious effect of the waiting period is that you cannot remarry during the Nisi period, be...

New Massachusetts Child Support Guidelines (2021): Big Changes, Little Changes, Typos & some Unexpected Results

UPDATE: The court has released a web calculating version of the 2021 MA Child Support Guidelines Worksheet .  It resolves some of the typos referred to below, but the unexpected calculations still apply. Every four years, per federal mandate, the Massachusetts Probate & Family Court revisits the Child Support Guidelines through the work of a Task Force appointed by the Chief Justice.  The 2021 Massachusetts Child Support Guidelines were recently posted.  They take effect on October 4, 2021.    If you are interested in a training on all of these changes to the new Child Support Guidelines: DMTA Presents the 2021 MA Child Support Guidelines Update  – Attend this event to learn the key updates you need to know for your mediation clients. Presented by Justin Kelsey of  Divorce Mediation Training Associates  and  Skylark Law & Mediation, PC . For a full comparison of all the  tracked changes between the 2018 and 2021 Massachusetts Ch...

2024 U.S. Presidential Party Platforms - What are the policy positions that could affect families?

While the laws that affect family formation, marriage and divorce are often made at the state level, there are also many policies and laws at the federal level that affect families and children.  Just some examples from recent years that have impacted families in my mediation practice include changes to the federal tax laws (such as  the elimination of the alimony tax deduction ) and U.S. Supreme Court rulings on same sex marriage and reproductive health rights.  In just over a month, the United States presidential election will have a significant impact on these federal policies going forward, and could choose the next appointments to the U.S. Supreme Court as well. In 2016 and 2020 we shared what each presidential platform said about families and policy regarding family formation and dissolution, and below we'll provide you an update on the 2024 presidential platforms.  As Maya Angelou said, "When someone shows you who they are, believe them the first time."...