On December 22, President Trump signed new tax reform legislation known
as the Tax Cuts and Jobs Act of 2017. While much of the attention was
focused on aspects of the bill that reduced corporate tax rates and placed
limits on the home mortgage interest deduction, the law also repealed
26 U.S.C. §215. These changes have upended federal tax assumptions
regarding alimony payments. Under the new tax law, alimony will now be
treated similarly to
child support. This is because the the “above the line” deduction that alimony
payers have enjoyed since 1942 will now be eliminated.
Additionally, the TCJA will no longer require alimony recipients to declare
payments as taxable income. These new changes will apply to divorce and
separation agreements signed on or after Jan. 1, 2019.
Alimony orders that have been finalized before this date will not be affected the new tax law.
Under the current tax laws, alimony payers had the benefit of a reduced
tax obligation if they make larger payments to the recipient. Because
the recipient is usually in a lower tax bracket, the two former spouses
could pay less in taxes than if they were still married. This is known
as “divorce subsidy” and has been scrapped by the new law.
I was recently asked about the significance of these new changes by
Rhode Island Lawyer's Weekly. Here’s what I had to say on the subject:
“Sometimes taxes are an incentive to people. But many times they
loathe paying alimony, so sometimes we work for tradeoffs, kind of like
‘a rose by any other name.’ For example, some payers may want
to pay it all up front because they don’t want to deal with their
Under the old tax law, parties were working off ‘gross.’
“For example, if the recipient needed $100 a week, it was more like
a wage that she paid taxes on. Under the new law, we will have to work
off ‘net.’ Whatever the recipient needs, that’s what
they should clear.”
Regarding alimony in Rhode Island divorces, I had the following to say:
“Alimony is not necessarily that common in Rhode Island. But for
those who qualify, the state statute remains in full force and effect.
Alimony in most instances is for a term, with the need typically tied
to rehabilitation so that a spouse can get back on her feet. There’s
also the question of whether the payer spouse has the ability to pay.
What’s changing is the tax consequences, not the concept of alimony
Do you have more questions about how your divorce might be impacted by
the Tax Cuts and Jobs Act of 2017? Contact our Rhode Island divorce lawyer
to set up your free case evaluation