On December 22, 2017, the President signed into law the Tax Cuts and Jobs Act. One big change in the act is that alimony payments are no longer tax deductible by the ex-spouse paying the alimony. According to the House Ways and Means Committee, which helped to draft the new tax laws, the ability to deduct alimony is a “divorce subsidy” that allows a divorced couple to achieve a better tax result for payments between them than a married couple can.”
For divorce or separation agreements executed after December 31, 2018, the ex-spouse paying alimony (maintenance in New York) will no longer be able to deduct the alimony payments and the ex-spouse receiving the alimony will no longer have to pay taxes on it. Opponents of the new law are concerned that since the money will be no longer deductible, higher-earning spouses will not be willing to pay as much alimony to their ex-spouses.
According to the Census Bureau, approximately 243,000 people received alimony in 2016. 98 percent of them are women.
In looking at family law policy trends, the decision to no longer make alimony tax deductible is in keeping with a general trend by legislators and courts to reduce the amount and duration of alimony payable to ex-spouses. Since many couples eventually divorce, spouses who make the decision to not work outside of the home or work part-time in order to support the other spouse’s career have to take a hard look at whether long term, that decision is wise from a personal financial position.