Maintenance Will No Longer Be Deductible after 2018

The new Federal Tax Code is upending 76 years of laws regarding the taxation of maintenance payments, known in many states as alimony.

Currently, the spouse paying maintenance after a divorce is able to deduct maintenance payments from their income taxes. The spouse receiving the payments then has to pay taxes on the extra income.  Beginning on January 1, 2019, this system reverses. For new divorces concluded before this date, the higher-earning spouse will no longer be able to deduct their maintenance payments, but the receiving spouse will have to add those payments to their gross income.

This will have the effect of bringing in more tax revenue to the Federal government, as the paying spouse generally will be taxed in a higher tax bracket than the receiving spouse.

However, this will also likely have the effect of spurring more divorce filings in 2018, and making those divorce proceedings more acrimonious.

As described by Politico:

The deduction is a big deal to splitting couples because if someone who earns, say, $250,000 — which puts them in the 24 percent income tax bracket under the new law — agrees to pay $4,000 per month, it really costs the person around $3,000 after taking the deduction into account. Without the break, many people will agree to pay only what would have been their after-tax amount — in this case, about $3,000. It is likely that more couples will end up fighting in court because they won’t be able to agree on alimony terms.