The deductibility of future alimony funds can solely be based mostly on the previous Cozen O’Connor

The Tax Cuts & Jobs Act of 2017 removed the tax withholding that was previously allowed on alimony payments effective January 1, 2019. This meant that alimony paid under an agreement entered into after December 31, 2018 could no longer be deducted from the income of the party making the payments, nor would it be included in the income of the party receiving the payments. The actual implementation of this change, however, remained unclear, particularly for agreements entered into before December 31, 2018 but changed after that date. Could these amended agreements still be subject to the old law or did the changes make payments subject to the new law?

On July 22, 2019, the IRS published an article clarifying the treatment of payments under an amended agreement. This article explained that the new law will apply to an amended agreement if the amended agreement 1) changes the terms of alimony or separate alimony payments and 2) states that alimony or separate alimony payments are not deductible or imposed by the payer’s spouse Income included is the receiving spouse. Changed agreements that do not change the payment terms and state that the payments are non-deductible / inclusive are therefore still subject to the old law.

For parties who have not yet finalized their divorce but have an ongoing support order entered before January 1, 2019, the IRS publication suggests that it is possible to maintain the deductibility of support payments by simply adding future payments as a change to the previous support order. However, it is important to discuss this possibility with an attorney as this argument has not been considered in court and the IRS may provide further clarification on this matter in the future.