Family law attorney Erin Nielson is joined by fellow Wilchins Cosentino & Novins attorney John Donahue to discuss federal and state tax treatment of alimony.

Some quick takeaways:

• Agreements entered into after December 31, 2018, alimony payments are not deductible to the payor spouse and are not reportable as income to the recipient spouse for federal tax purposes.

• Agreements entered into prior to January 1, 2019, alimony payments remain deductible to the payor spouse and reportable as income to the recipient spouse for federal tax purposes.
• Modifications of existing agreement, if carefully crafted, can retain the deductibility for the payor spouse if the original agreement was entered into prior to January 1, 2019.

• For Massachusetts tax purposes, alimony continues to be deductible by the payor spouse and counted as income for the recipient spouse.

How does this impact the Alimony Reform Act?

Under the Alimony Reform Act, alimony was capped at 30 to 35% of the difference between former spouses’ respective incomes. However, this cap was based on the universally accepted assumption that the payor spouse would be entitled to deduct the alimony payment from their taxable income. As this is no longer the case, there is discussion that the percentage should be lowered. In response, in 2019 the Massachusetts Bar Association proposed a range of 23% to 25% of the difference between the former spouses’ respective incomes. However, this has not been adopted by statute.

If you would like to know more about alimony in Massachusetts, feel free to reach out to the experienced family law attorneys at Wilchins Cosentino & Novins at 781-235-5500 or schedule a phone call here.