Existing Alimony Deduction Repealed Under New Tax Law
Under Ohio divorce decrees, alimony (spousal support) payments have been typically deductible to the payor and taxable to the recipient. The income tax treatment of these payments has been a significant factor in negotiating the amount of alimony. For new divorce cases not completed before January 1, 2019, these payments are now "neutral" per the new Tax Cuts and Jobs act. The existing alimony deduction has been repealed. This means that newly divorced individuals will not enjoy the benefits/burdens of alimony taxability (unless there was a executed separation agreement preserving such previous tax treatment signed prior to the end of last year).
A New Frontier For Operating Under The New Tax Law And Divorce In Ohio
What does this mean for individuals now in the process of divorcing or who get divorced after the Tax Cuts and Jobs Act in 2019? Essentially, we are now in the infancy of operating under the new tax law and divorce Courts are evaluating a fresh and starting to formulate new positions/practices. In Ohio, there is not a statutory guideline for setting alimony amount payments as there is for the payment of child support. Instead, ORC section 3105.18 lists 14 factors the Court is to consider when determining the proper amount and length for an alimony award.
Certainly the income the husband and wife receive is a significant factor. "Rules of thumb" as to alimony amounts will now change to include the elimination of the tax consequences. I have heard domestic relations judges express a diverse range of positions on how they will alter these support amount calculations. They are not at all uniform in their philosophy or approaches.
Payment amounts could go down around 20% or more to adjust for the taxability elimination. Besides repealing the alimony tax deduction, the new tax law also reduces rates. Please note that the new tax law does not affect or alter the IRS alimony deductibility rules in cases finalized prior to January 1, 2019. I expect at least for the foreseeable future that more CPA’s will be called to testify in Court as to these implications. Lots of arguments will be made on this subject until courts and appeal courts have weighed in.
Alimony Payments Still A Gray Area In Ohio
As a divorce litigator for 40 years, I can tell you the most issues are "gray" and not "black or white”. Judges opinions vary dramatically from Court to Court often times on even the same factual pattern. As time passes, Courts and experienced divorce lawyers will be better able to provide guidance. We will keep our readers posted on this topic as trends become more apparent. In the meantime, try to understand it if your divorce lawyer is somewhat vague when you inquire about the alimony payment issue since this is all brand new.
Additionally, new Ohio child support guidelines will take effect on March 28, 2019 too! More about those changes soon. Suffice it to say, that the "black or white" in the divorce world in Ohio is a lot "grayer" in 2019.
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Robert L. Mues
Robert Mues is the managing partner of Dayton, Ohio, law firm, Holzfaster, Cecil, McKnight & Mues, and has received the highest rating from the Martindale-Hubbell Peer Review for Ethical Standards and Legal Ability. Mr. Mues is also a founding member of the "International Academy of Attorneys for Divorce over 50" blog. Mr. Mues has also been a dog owner for 55+ years, and just recently, he and his wife are the owners of "Ralph", a rescued mixed Wire Hair and Jack Russell Terrier.