Family Law Alert: New 2017 Tax Cuts and Jobs Act Eliminates Tax Deduction for Alimony Payments

By Carl W. Heckert — The recently passed 2017 Tax Reform makes a significant potential tax increase for both the alimony payor and the recipient for post-2018 divorce or separation agreements. According to the Tax Cuts and Jobs Act, generally, for divorce and separation documents executed after December 31, 2018, the prior deduction for the payment of alimony and separate maintenance will not apply. The Act also does not allow the recipient of alimony to include it in their gross income for tax purposes.

The intended consequence is for former spouses to pay more overall tax since generally the payor spouse is in a higher tax bracket than the recipient spouse. Ultimately, this will result in the payor spouse using after-tax dollars to pay a reduced amount to the recipient spouse, since there are less overall funds to be divided.

For current divorcing spouses, this should provide some incentive to resolve alimony issues and complete agreements prior to the end of 2018. For agreements or orders executed prior to December 31, 2018, the prior deductibility of alimony and separate maintenance payments appear to still apply.

Code Section 215 is repealed by the 2017 Tax Cuts and Jobs Act §11051(a); Code Section 62(a) is amended by the 2017 Tax Cuts and Jobs Act §11051(b)

Carl W. Heckert is a partner at Gawthrop Greenwood, PC, where he specializes in Family Law. Carl can be reached at checkert@gawthrop.com or 302-777-5353.