I am part of a small online community of women in Hunterdon County, New Jersey who engage in an information exchange, if you will. Recently, a woman posted a question concerning her new child support award and potential alimony award. Within that post, she inquired as to how to file taxes given the prospective payments of alimony and child support. Many women responded to her post advising that child support was non-taxable and non-deductible (TRUE!); however, it was also stated that alimony was taxable to the payee spouse (in this case, the woman) and deductible to the payor spouse (in this case, the soon-to-be ex). I realized that most women posting were commenting from their own personal experience or that of a family member or friend. However, what once was (the taxability and deductibility of alimony) is no longer the case!
Tax Cuts and Jobs Act
The Tax Cuts and Jobs Act, signed into law on December 22, 2017, ended the payor’s tax deduction and the payee’s taxable income as to alimony. Therefore, all alimony awards entered as of January 1, 2019 forward are non-deductible and non-taxable on your Federal tax returns. However, on your New Jersey tax returns, alimony is still deductible.
It is important to note that the Tax Cuts and Jobs Act affects only those agreements entered subsequent to 2018. All divorces and separation agreements entered into prior to January 1, 2019, are not affected by this Act. If you later modify an award which was entered prior to January 1, 2019, said modification is not subject to this new Act unless the modification expressly states the repeal of this alimony payment deduction applies to the modification.
While we all benefit from seeking out the advice of friends (myself included), when it comes to securing your financial future, consulting with a professional accountant or attorney is the smartest route.
About the Author
Ms. Kelly Skopak, Esq., Partner, in Family Law, is a highly skilled family law practitioner handling all aspects of family law matters including divorce, spousal support, equitable distribution, complex property division (involving business and personal assets), custody and parenting time disputes, parent/child relocation, child support, domestic violence, guardianship, and related matters. Ms. Skopak focuses on assisting clients navigate the financial and emotional intricacies of the divorce process and prides herself on being a capable and compassionate attorney. Her empathy and understanding of complex emotional situations make her an indispensable ally when faced with complex family law matters. If you are being confronted with complicated family law topics, let Kelly Skopak, Esq. help.