The 2017 Tax Cuts and Jobs Act (TCJA) marked a sea change in the longstanding federal alimony regime that allocated tax responsibility for alimony such that the payor of alimony would receive a deduction from his or her taxable income for alimony payments made and that the recipient of alimony would include such payments in his or her taxable income. Specifically, the TCJA repealed §§71 and 215 of the federal Tax Code, which provided the basis for the existing system, and provided instead that alimony would be non-deductible to the payor and tax-free to the recipient for separation agreements or divorce judgments going into effect on or after Jan. 1, 2019 or qualifying modifications to such agreements or judgments effectuated after Jan. 1, 2019.
Two years have passed since the changes to the alimony regime introduced by the TCJA went into effect. These changes have raised significant questions for practitioners and litigants in New York wrestling with issues relating to maintenance (alimony) arrangements in a post-TCJA world. As an initial matter, notwithstanding the TCJA, maintenance remains deductible under New York state law (see New York State Tax Code §612w), thereby bringing the federal and state tax systems into conflict with one another. See also Racquel L.J. v. Derwin J.J., 64 Misc.3d 1221(A) (Sup. Ct. Kings Cty. 2019) (declining to consider the impact of the non-deductibility of maintenance under the TCJA in reaching an award of maintenance, and noting that maintenance remains deductible under state law); Y.L. v. L.L., 68 Misc.3d 1209(A) (Sup. Ct. Richmond Cty. 2020) (ruling, in light of the continuing tax-deductibility of maintenance under state law, that the maintenance award reached by the court be tax-deductible to the payor and taxable to the payee to the extent allowable under federal and state law).