2018 was a quiet legislative year on the matrimonial front in New York state. Ironically, it was federal legislation that is about to have a major impact on the matrimonial field. Specifically, the Trump tax reform legislation (officially called the Tax Cuts and Job Act) which was enacted at the end of 2017 will have its major impact on the matrimonial field effective Jan. 1, 2019.

In particular, the tax reform legislation eliminated the “alimony” deduction. Since approximately 1942, spousal maintenance has been deductible to the payor and includable in the recipient spouse's income for tax purposes. The federal tax legislation eliminates the “alimony” deduction going forward. Maintenance provisions found in a Separation or Marital Settlement Agreement or Judgement of Divorce which were entered into by Dec. 31, 2018 should still be exempt from the new law and remain deductible to the payor and includable in the recipient's income for tax purposes. However, if there was neither a valid Separation or Marital Settlement Agreement in place or a Judgement of Divorce as of Dec. 31, 2018, spousal maintenance will no longer be subtracted from the payor's income and added to the recipient's income on the federal tax return. This is true, even if there is a pending divorce action.

At first glance, spouses receiving maintenance might view the elimination of the alimony deduction as a windfall as the maintenance received will no longer be taxable income on the federal return. However, the net effect of the law is that there will be less money available to a divorcing couple with which to pay maintenance as the payor spouse (typically in a higher tax bracket) will have a larger tax bill given the elimination of the alimony deduction. Unless there is a legislative fix, it will be up to judges to determine whether equity will require more “deviations” from the maintenance guidelines to make up for the elimination of the alimony deduction. That being said, attorneys representing the payor spouse may want to consider presenting proof showing what the net effect to the payor would have been had the maintenance been deductible to the payor as opposed to non-deductible. Some computer programs which calculate the maintenance guidelines amount are able to provide this information. Alternatively, an accountant may be needed to provide these figures.

While the federal alimony deduction is eliminated for future divorces or agreements executed after Jan. 1, 2019, the deduction remains intact for purposes of New York state and New York City income taxes. There was a provision in the 2018 budget bill whereby New York opted out of the federal tax scheme and continued the alimony deduction at the state level. Therefore, if parties enter into a Separation or Marital Settlement Agreement or get divorced after Jan. 1, 2019, maintenance paid pursuant to the terms of the settlement agreement or divorce judgment will still be deductible on the state tax return, even though the deduction is eliminated on the federal tax return.

Section Update

The Family Law Section continues to be a vibrant section, providing our nearly 2,500 members with a plethora of benefits. Our three-day summer meeting this past July at the Equinox Resort in Vermont was a great success. We even had to cut off registration because the meeting sold out in a matter of days. Our section's hard-working CLE committee continues to put on CLE programs which are second to none. Our section's website provides our members with monthly case law and legislative updates prepared by past chair, Bruce Wagner. Our legislation committee continues to monitor and comment on legislation and proposed rule changes affecting matrimonial and family law. Our quarterly publication, the Family Law Review, provides invaluable information and timely articles to our members. Our section's daily listserve remains extremely active, whereby members pose practice questions which are answered by other section members. This past November, the Section was honored to receive the Pipeline Diversity Award from the Scales of Justice Academy in recognition of the section's continued support of the work of the academy in exposing underserved high school women to various areas of the law. I wish to thank my fellow officers, Rosalia Baiamonte, Peter Stambleck and Joan Adams, as well as the co-chairs from our various committees and the past section chairs, for all of their hard work in continuing to keep our section active and vital.

Eric A. Tepper is a partner at Gordon, Tepper & DeCoursey.