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Some states may still allow tax deduction for alimony payments

The Tax Cuts and Jobs Act reportedly caused a flurry of activity in Maryland divorce courts and others around the county at the end of 2018. Among its many provisions, major changes were made to the way alimony was to be handled for federal income taxes beginning in 2019. Matrimonial lawyers stated that the change prompted many couples to finalize their divorces so that they would be grandfathered under the old law. While the new provision is now in place, some tax experts have suggested that individuals need to also take a look at how alimony is viewed for their state income tax purposes.

Prior to 2019, those paying alimony could deduct the payments on federal income tax returns. Those receiving it had to pay taxes on the amount received. This reversed under the new law, eliminating the deduction for payers as well as the tax burden for recipients. However, the previous provisions may still apply for some state tax returns.

Individuals would need to determine whether their state may allow a deduction for alimony payments. If a state defines taxable income or adjusted gross income exactly as the federal government does, one would not be able to deduct alimony payments on a state return. However, a deduction may still be allowed if a state followed the federal guidelines at a specific point in time. Likewise, if a state has established its own tax legislation, the deduction for alimony may still be available.

It is vital to work with someone who has a thorough knowledge of how new laws may impact those going through a divorce. A Maryland attorney can offer guidance regarding how alimony is taxed as well as other issues throughout the divorce process. A knowledgeable lawyer will strive toward achieving the best outcome possible in the proceedings for clients.

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