The matrimonial bar is grappling with the effect of a tax bill passed by Congress and signed by President Trump at the end of 2017, which removes the option for divorcing spouses to pay alimony that is taxable to the payee and deductible by the payor. Matrimonial practitioners have long used the alimony deduction to help our clients and thus encourage settlements. But the 2017 statute abolishes the deduction with respect to matrimonial agreements signed after Dec. 31, 2018.
The New York legislature mitigated the federal change and threw in a few new twists. The state budget makes alimony deductible from state and New York City taxable income, even if the agreement came too late for the federal deduction. Furthermore, loopholes in the state law will sometimes allow one party to enjoy a deduction without the other party reporting income, to achieve tax savings that pre-2017 federal law did not allow, and even to deduct the same payment twice.
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