Alimony: Tax Reform Impacting Divorces

Please call us today, 734.927.9782, to discuss how your divorce could be impacted under the Tax Cuts and Jobs Act.

Alimony and Current Law:

Before the enactment of the 2017 Tax Reform Act alimony payments were deductible from the gross income of the payor and taxable as income to the recipient of the alimony. Under current Federal Law and until December 31, 2018, these payments will continue to be deductible from the gross income of the payor and taxable as income to the recipient.  In other words, agreements executed on or before December 31, 2018 continue to be covered under the current law, unless modified after December 31, 2018 and the modification expressly adopts the tax treatment of the new law.  The 2017 Tax Reform Act preserves the shifting of taxability from payor to recipient for Orders or Judgments entered on or before December 31, 2018; but allows those who finalize their divorce before December of 2018 to elect to apply the new law to their agreement.

Alimony on or after December 31, 2018:

The 2017 Tax Reform Act repealed the alimony deduction.  The repeal of the deduction means that all Orders or Judgments entered on or after December 31, 2018 will no longer allow alimony payments to be deductible by the payer or included as income on the taxes of the recipient. 

The law provides that it applies to decrees of Judgment of Divorce or Separation, written agreements or decrees. Hence it would seem that orders that provide for the shifting of taxability which are modified by order or agreement and entered after December 31, 2018 would create non-deductible, non-taxable alimony.

The elimination of the alimony deduction presents a new challenge to divorce practitioners. However, the elimination of the deduction does not preclude other ways to help those that pay spousal support and those that receive same.

Your specific situation may be somewhat different from the norm; please call, 734.927.9782, the Canton Michigan Divorce and Family Law Lawyers and Canton Michigan Alimony Attorneys at Stelmock Law Firm, PC to discuss your questions regarding Alimony.  We represent clients in the Metro Detroit area (Canton, Plymouth, Northville, Livonia, Westland, Ann Arbor, Novi) and throughout Wayne, Washtenaw, Oakland, and Livingston counties. The firm’s office is located at 8556 N. Canton Center Road, Canton, Michigan 48187