SPOUSAL MAINTENANCE AND THE NEW TAX LAW

For many years, spousal maintenance (alimony) has been tax deductible for the person paying it and taxable income for the person receiving it. But that basic tenet of divorce no longer applies due to provisions in the GOP tax law. Here is a case which considers the new tax law effect on spousal maintenance and reduces the statutory guideline amount by 12%.

WISSEMAN v. WISSEMAN, 2019 NY Slip Op 29092 - NY: Supreme Court, Dutchess 2019:

"On March 6, 2019 a hearing was held. Prior to the hearing, the parties' attorneys represented that all issues were able to be resolved with the exception of the sum of maintenance. Although the parties had agreed that the husband would be obligated to pay maintenance to the wife for a period of two years they were unable to agree upon the sum. The parties' attorneys represented that the basis for the inability to agree was the change in the tax law effective this year pursuant to which maintenance is no longer tax deductible to the payor spouse, in this case, the husband, and no longer includable as taxable income to the payee spouse, in this case, the wife. The quandary is twofold. First, it is the husband's position that he should pay less maintenance since he cannot deduct the maintenance payment from his taxable income. Second, the question is how much less. The parties agree that the husband's federal tax rate is 22%. Therefore, he claims that an award of maintenance calculated by strict application of the maintenance statue (Domestic Relations Law §236B(6)) would be unjust and inappropriate and that his statutory calculation should be reduced by 22%. However, the parties agree that the wife's federal tax rate is 12%. She argues that strict application of the statutory formula is mandated, and that reduction of her award by 22% would result in even less of a net payment to her than would have resulted if she had to claim the maintenance as taxable income.
Counsel stipulated that based upon the husband's annual income of $70,800.00 and the wife's of $30,000.00, strict application of the statutory guidelines would require maintenance of $512.54 per month.

The original purpose of the tax law enabling the payor spouse to deduct maintenance from his or her taxable income was to leave more disposable income available to both parties. This was accomplished by the spouse in the higher income tax bracket taking the deduction and having the sum deducted includable as income to the spouse in the lower tax bracket. Now, more tax is paid and the spouses as a unit have less disposable income.

When deciding the issue of maintenance, the court must consider all of the factors set forth at Domestic Relations Law §236(B)(6). At bar, the parties agree that maintenance is due and only the sum is to be determined. Their incomes and income abilities have been agreed upon, as has been the duration of maintenance. Both parties have represented that the other factors have been considered, and agreed upon, with the exception of the tax consequences to each party. Based on those representations and those relevant factors, strict application of the maintenance guidelines would be unjust and inappropriate so as to warrant a deviation. Based upon all of the above, it is hereby

ORDERED that the husband shall pay maintenance to the wife in the sum of $451.04 per month. The statutory award is reduced by 12%, the net result of which is application of the guidelines as intended by the New York State Legislature prior to the federal change in the relevant tax law, impacted only by a reduction concomitant with the wife's tax bracket and what she would have been obligated to include as taxable income. Until this court is guided by a higher authority or legislative change it finds that such deviation under these circumstances is just and proper."