How is Alimony Taxed on Long Island?

Alimony, also called “spousal maintenance” on Long Island, is a payment usually made from the higher earning spouse to the other to replace a portion of lost income until the lower earning spouse is able to financially support themselves independently. Often, one spouse will give up career opportunities while the other pursues theirs to keep the home and/or take care of children, leaving them at a distinct financial disadvantage in the event of a divorce. Spousal maintenance was originally designed to bridge that gap, and since its inception, many laws have been created to govern how and when alimony is paid and taxed.

Alimony payments are usually substantial since they are calculated based on the amount of money the higher earning spouse makes. This means that the taxes on the money are also substantial. Both spouses cannot pay taxes on the same money, meaning a decision must be made regarding who bears the tax burden. Here’s what you need to know about how spousal maintenance is taxed on Long Island, what recent changes have taken effect, and what this could mean for your alimony payments.

How Tax Law Changes in 2019 Affect Alimony Payments

In 2019, some significant changes were made to federal tax law that greatly affects families who pay and receive alimony. Essentially, the tax burden is shifting from the recipient of the money to the payer. At the end of 2018, family law firms saw the impact this change had on communities across the nation. Spouses who were likely to have to pay spousal maintenance wanted to finalize the divorce by December 31, while spouses who were likely to receive it wanted to delay the process just a little longer.

How Alimony Was Taxed in 2018 and Prior

Before the changes to federal tax law went into effect, alimony was considered an above-the-line deduction, meaning that it was deducted before adjusted gross income is figured. This could be done even without itemizing and reduced overall taxable income. Being able to deduct alimony took some sting out of it, especially for individuals in higher tax brackets who were paying $30,000 a year or more in alimony.

How Alimony Will Be Taxed in 2019 and Beyond

As of January 1, 2019, alimony payments are no longer eligible for a federal income tax deduction under the Tax Cuts and Jobs Act. Once the divorce is finalized, the payer will not be able to deduct alimony payments and payments will not be treated like regularly taxed income. This means that in cases where spousal maintenance is awarded, the tax burden is shifted from the recipient to the payer, which can amount to thousands of dollars depending on how much the alimony payments are.

Who Still Gets a Deduction

Anyone who finalized their divorce prior to 2019 will still be able to deduct alimony payments and report payments as taxable income. However, it’s important to evaluate how this may change if a modification to the divorce decree is made under the new tax laws. If you are considering modifying your existing divorce agreement, you should discuss the risk versus benefits with an experienced Long Island divorce lawyer.

Are Child Support Payments Affected?

The Tax Cuts and Jobs Act did not include provisions for child support laws, therefore the laws regarding how child support is taxed on Long Island are not affected by the changes. Child support payments will continue to not be included as taxable income by the recipient or as tax-deductible by the payer, meaning that the payer bears the tax burden.

For more information, please read our article, How to Avoid Paying Alimony or Spousal Support in New York

Contact a Divorce Lawyer Regarding Alimony & Taxes

If you are considering getting a divorce or modifying your existing divorce decree under the current federal tax laws, it’s critical to understand how your alimony payments will look. Consult with an experienced divorce attorney before initiating the process to protect your best interests and make an informed decision about your next step.

Check out our Divorce Guide for Dads for more information about divorce issues specifically related to fathers.

Our Long Island family law firm can help you learn about current laws that may affect your divorce and can provide you with comprehensive legal representation. Contact us today to schedule a complimentary consultation to discuss the details of your case at 631-923-1910. We are available now to speak with you.