April 16, 2019 Articles

How the Tax Cuts and Jobs Act Affects Matrimonial Matters

Among the many changes to the tax laws are the deductibility of alimony payments and several tax provisions that will affect the valuation of a privately held business.

By Louis Panariello

Introduced in the House of Representatives by Congressman Kevin Brady (R-TX) on November 2, 2017, the Tax Cuts and Jobs Act of 2017 (TCJA) was officially signed into law by President Donald Trump on December 22, 2017. The TCJA will be effective for divorce or settlement agreements executed after December 31, 2018. 

As is true of any new law, the TCJA contains, in part, language to be deciphered and interpreted by tax professionals, attorneys, courts, and other professionals. Over the years to come, rulings by the supreme courts and appellate divisions will create precedent for the sections of the TCJA that are less rigid and ambiguous. Nonetheless, during the final months of 2018, lawyers were tasked with navigating the new tax bill and determining whether or not the provisions of the TCJA would be beneficial to their clients. The operative question was: Should the divorce agreement effectuate prior to year-end under the old provisions of the tax law, or is it more advantageous for the divorce agreement post-2018? The operative question forging forward will be: How does the TCJA affect divorce and settlement agreements entered into starting January 1, 2019?

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