Although this blog previously discussed this, with the end of the year approaching, this is a great occasion to remind Massachusetts residents of upcoming changes in the way alimony gets handled for tax purposes.
For divorces and other orders finalized before the end of this year, that is, by December 31, a person ordered to pay alimony may under the right conditions be allowed to take those payments as a deduction off of their taxes. On the flip side, a person who is receiving alimony had to report those payments as income on their federal returns.
After the turn of the year, this will change. For decrees entered starting January 1, alimony will afford no tax deduction to the person paying it, and it will not count as income to the person receiving it. In this respect, it will function basically like child support.
Some sources suggest that someone who is likely to pay alimony may want rush the process of obtaining a final order so that they can get the benefit of the tax deduction. However, rushing can cause more problems than solutions. For one, just like anything else, a divorce or separate support decree handled hastily is one that may be rife with mistakes and critical oversights that, long term, can cost a lot more than any tax savings one might enjoy.
Alimony is, after all, part of a bigger picture, and it is important not to miss other key aspects of that picture in order to capitalize on what could be relatively small savings.
How Springfield residents should handle this new treatment of alimony, particularly if they are in the midst of deciding the issue right now, is really a question they should talk over with their attorney. However, it is still important for everyone to be aware that the change is forthcoming.