New Tax Law Makes Maintenance Payments Non-Taxable
The Tax Cuts and Jobs Act enacted at the end of 2017 included changes to the treatment of maintenance payments in a divorces with marital dissolution agreements that are entered into or modified after December 31, 2018.
Under the “old” law, which is now repealed, the maintenance paying spouse was able to take a tax deduction for the amount of maintenance paid to a former spouse. The recipient spouse had to include maintenance received as income. Under the “current” law, maintenance payments are a non-taxable event. The maintenance paying spouse cannot take a deduction, and the recipient spouse does not include the payments as income.
However, the repeal will not affect marital dissolution agreements entered into before December 31, 2018. The “old” law will still apply to those agreements.
Agreements which were entered into before December 31, 2018, but which are amended or modified in any way after December 31, 2018, could be treated under the “current” law. Thus, there is a chance that the maintenance payments will change from taxable to non-taxable events. People considering amending or modifying their existing marital dissolution agreements should be careful to consider the potential tax consequences of doing so.
This is not intended to be legal advice. You should contact an attorney for advice regarding your specific situation.
Andrea L. Dumais is senior counsel attorney with the firm and practices Family, Matrimonial and Criminal Law. She can be reached by phone at 866-303-9595 toll free or 845-764-9656 and by email.