Making Sense of Recent Law Changes

Happy New Year, all! May 2018 bring you health, happiness, and prosperity.

The federal Tax Cuts and Jobs Act, in conjunction with Massachusetts’ Alimony Reform Act, will bring the Commonwealth’s divorce practitioners and their clients a certain amount of confusion.

Prior divorces and divorces with agreements completed in 2018 will not be affected. But most divorces take longer than a year to complete, and thus, many folks filing in 2018 will be impacted by the changes.

The new federal law eliminates the deduction for alimony in divorces occurring after December 2018. Every previous settlement contract (and judicial divorce decision) was negotiated with consideration of the alimony deduction. It enabled the parties to save some of the money that would otherwise have gone to the government in taxes.

The Massachusetts Alimony Reform Act was written with these tax implications in mind. The percentages of alimony to be paid (30% to 35%) reflect the deduction to the payor, and are, therefore, higher than the child support calculation.

Both of these are laws, and the federal supersedes the state. As a result, real inequities to the payor spouses will exist if the legislature does not find a way to make necessary amendments in 2018.