As I wrote in a prior blog piece, under M.G.L. c. 208, sec. 53, the amount of alimony paid to support a former spouse should generally not exceed the recipient’s need or 30 to 35% of the difference between the parties’ gross incomes established at the time of the order being issued. While the Court has authority under the statute to deviate from the percentages, the 30 to 35% range provided an easy measure that helped many parties come to agreement on alimony. Then came the Tax Cuts and Jobs Act.
The Tax Cuts and Jobs Act signed by President Trump in 2017 included provisions eliminating federal tax consequences for alimony payments made pursuant to judgments issued and agreements entered into after December 31, 2018. Many people with pending divorce actions rushed to get their divorce agreements signed and approved by the Court before year-end 2018 to ensure that their alimony payments would be deductible by the payor and taxable to the recipient. For those who will begin paying alimony in 2019 or future years, alimony payors will no longer be able to deduct alimony from income reported on a federal income tax return and recipients will no longer be obligated to declare alimony as income on a federal income tax return. The 30 to 35% guideline for alimony assumed the taxable nature of alimony payments. So, is there a fix in the works to change the percentages set forth in the Massachusetts alimony statute?
The Family Law Joint Legislative Task Force, various bar associations, and interest groups conferred and held meetings to gather information and make proposals relative to what percentage of alimony, when non-taxable, is equivalent to taxable alimony. Marc Bello, a CPA with Edelstein & Company in Boston, has created a chart of equivalent net income results, which he has graciously shared with divorce practitioners. Mr. Bello also developed a proposal that has been endorsed by the Massachusetts Bar Association. Yet, as we quickly approach the end of the first quarter of 2019, there is still no legislation pending to change the 30 to 35% set forth in the statute. Judges are left to their discretion to determine the appropriate amount of alimony given the non-taxability of the payments. We await proposed legislation to provide a clearer guideline for determination of alimony post the Tax Cuts and Jobs Act.