CLIENT ALERT: UPDATE on Tax Bill

New Jersey Divorce Law Firm Offer Client Alert: UPDATE on Tax Bill & AlimonyNew Tax Bill Signed Into Law Will Eliminate The Deduction for Alimony Payments Effective January 1, 2019

Under the new tax bill signed into law on December 22, 2017, effective for all divorces that happen on or after January 1, 2019, alimony payors will no longer be able to deduct alimony payments in their tax returns. Conversely, alimony recipients will no longer have to declare alimony on their taxes either.

Typically, the payment of alimony is set forth in what the Courts refer to as Marital Settlement Agreements (a.k.a. Property Settlement Agreements). The tax bill defines a “divorce or separation instrument” as one of the following:

“(i) a decree of divorce or separate maintenance or a written instrument incident to such a decree,

“(ii) a written separation agreement, or

“(iii) a decree (not described in clause (i)) requiring a spouse to make payments for the support or maintenance of the other spouse.”.

The effective date of this change in the taxability of alimony will be any divorce or separation agreement dated after December 31, 2018, as set forth below:

(c) Effective Date.—The amendments made by this section shall apply to—

(1) any divorce or separation instrument (as defined in section 71(b)(2) of the Internal Revenue Code of 1986 as in effect before the date of the enactment of this Act) executed after December 31, 2018, and

(2) any divorce or separation instrument (as so defined) executed on or before such date and modified after such date if the modification expressly provides that the amendments made by this section apply to such modification.

Anyone who has questions about this new tax bill should contact their lawyer immediately, and also their trusted tax professional, as the taxability of alimony will vanish at the end of 2018.

At Lyons & Associates, P.C., our mission is to keep all families informed of changes in the law. If you have questions about this law, or any other issues, call us at 908-575-9777, or contact us online.

Written by: Marissa Del Mauro