Now that the new tax law is official, this is what it means for divorcing couples:
First of all, alimony or maintenance as we call it in New York, will not be deductible by the payor for any agreement executed after December 31, 2018. Note that the divorce judgment does not need to be signed—only the agreement needs to be executed. This means that 2018 may be a very busy divorce year. People who have been thinking about it may be more likely to take action knowing that it may be more expensive later on.
Secondly, when New York State came out with the maintenance guidelines a couple of years ago, the guidelines were based on the fact that the maintenance would be deductible. The fact that we have a whole year until executed agreements are included under the new tax law means that New York State may want to consider revising those guidelines to reflect the new law. Otherwise, there will be more litigation as the payor spouse will not want to sign an agreement they feel is grossly unfair. We practitioners used to be able to “sweeten” the deal by letting the payor know that they would get a tax deduction and soon that will not be a reality.
Thirdly, when discussing financials, child support, maintenance and its tax treatment is normally taken into account. Now that maintenance will have a “tax neutral” treatment, those calculations will need to change as well.
You might think that the receiver of maintenance will be pleased that they no longer have to pay income tax on their maintenance; however, they presumably paid the tax on a lower income. Now tax will be paid on the payor’s higher income. So, overall, there will be less money for the family.
How the new tax law may affect you depends on a lot of factors. Always check with your CPA prior to taking any action which may have a tax implication to be sure that you are making an informed decision.
Deborah E. Kaminetzky, Esq.
Kaminetzky Law & Mediation, P.C.
670 Long Beach Blvd., Suite 205,
Long Beach, New York 11561
- Posted by Deborah E. Kaminetzky
- On January 5, 2018
- 0 Comments