A separate maintenance agreement (SMA) is a formal document that outlines the rights and responsibilities of a married couple who are living apart but not legally divorced. The SMA covers topics such as child custody, child support, spousal support, and property division.
If you entered into an SMA before 2020, there are a few important factors to consider. In recent years, there have been changes to tax laws that may impact the terms of your agreement.
One significant change is the elimination of the tax deduction for alimony payments. Prior to 2019, the person paying alimony could deduct those payments from their taxable income, while the recipient had to pay taxes on the income. However, this deduction is no longer available for new agreements executed after December 31, 2018. If your SMA was executed before this date, then the tax deduction for alimony payments may still be available to you.
Another change that may impact SMAs executed before 2020 is the tax treatment of child support payments. Child support payments are not tax deductible for the paying spouse, and they are not considered taxable income for the recipient. However, some SMAs may have included provisions that allocated a portion of the payments as alimony in order to take advantage of the tax deduction. If this is the case for your agreement, it`s important to review the terms with a qualified tax professional to understand how the new tax laws may impact your finances.
In addition to tax changes, there are other reasons why you may want to review your SMA. For example, if your agreement was executed before significant changes in your life, such as the birth of a child or a change in financial circumstances, then it may be necessary to modify the terms of your agreement to reflect these changes.
Overall, if you have an SMA that was executed before 2020, it`s important to review the terms in light of recent changes to tax laws and other factors that may impact your situation. Consulting with a qualified attorney or financial advisor can help you understand your options and ensure that your agreement continues to meet your needs.