As I wrote in a previous blog article, under MGL c. 208, sec. 53, the amount of support for a former spouse should generally not exceed the needs of the recipient or 30% to 35% of the difference between the gross incomes of the parties as determined at the time of the order. While the law allows the court to derogate from the percentages, the 30% to 35% range represented a simple measure that helped many parties reach an agreement on alimony. Then came the Tax Cuts and Jobs Act.
The Tax Cuts and Employment Act signed into law by President Trump in 2017 included provisions to eliminate federal tax consequences for child support payments made pursuant to judgments and agreements made after December 31, 2018. Many people with pending divorce cases rushed to have their divorce settlements signed and approved by the court before the end of 2018 to ensure their alimony payments are deductible by the payer and taxable by the recipient. For those who begin paying alimony in 2019 or in the years to come, alimony payers can no longer deduct alimony from income reported on a federal income tax return, and recipients are no longer required to include alimony payments as income on a federal income tax return. The 30-35% alimony guideline assumed taxation of alimony. So, is a solution in the works to change the percentages set out in the Massachusetts Child Support Act?
The Family Law Joint Legislative Task Force, various bar associations and advocacy groups held meetings to gather information and make suggestions as to what percentage of alimony, when non-taxable, is equivalent to taxable alimony. Marc Bello, a chartered accountant at Gemstone & Company in Boston, created a chart of matching net income results that he has graciously shared with divorce practitioners. Mr. Bello also developed a proposal that was approved by the Massachusetts Bar Association. However, as we fast approach the end of the first quarter of 2019, there is still no legislation pending to change the 30% set in the law to 35%. It is up to the judges to determine the appropriate amount of alimony as the payments are not taxable. We await legislative proposals to provide clearer guidance for determining alimony payments under the Tax Reduction and Employment Act.
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