By Karen E. Boston, Esq.
The 2017 tax reform legislation has made numerous changes in the tax law arena, including an increase in the standard deduction, an increase in the child tax credit, a change in the tax treatment of spousal support payments, and rules pertaining to the use of college savings 529 plans, among other modifications.
For instance, 529 college savings plans may now be accessed for certain pre-college educational expenses, including private school tuition and tutoring subject to certain limitations on the amounts. There may also be additional requirements. This could be beneficial to families seeking additional resources to cover such costs when in the midst of a divorce.
More significantly, the tax treatment of spousal support payments was drastically changed. Currently, a payor of spousal support is entitled to deduct payments made to a former spouse in the form of spousal support from his or her income, resulting in a reduced adjusted gross income. Meanwhile, recipients of the spousal support must include spousal support payments in his or her income and are taxed accordingly. However, for divorces after December 31, 2018, this will change. No longer will a payor of spousal support be entitled to deduct these payments from his or her income, nor will the recipient of the support be required to pay taxes on spousal support income. This will result in less combined available income.
These changes to the spousal support tax laws are effective for any divorce or separation instruments executed after December 31, 2018. For divorces or separation instruments executed prior to December 31, 2018, the changes may apply for modifications made if the modification expressly states that the amendments made by this tax section apply to the modification. It is very important for persons who currently pay spousal support or receive spousal support, or who may in the future, to seek the advice of an experienced family law attorney and tax professional to discuss how he or she may be impacted by the new tax laws.