Spousal Support & The New Tax Law

No Longer a Tax Deduction

The new tax laws enacted by Congress have changed the way spousal support (alimony) is treated. Beginning January 1, 2019, it will no longer be a tax deduction for the payor. The law applies only to spousal support obligations arising from court orders and agreements made after December 31, 2018. Modifications of prior spousal support orders will only be impacted if the modification “opts-in” the tax treatment.

Less Money to Go Around

It’s not just the payor who is impacted by this change. The recipient of spousal support will no longer need to claim the payments as income. This means the recipient will not be taxed on the money received. This new treatment will change the way we approach the award of spousal support. It will likely mean lesser amounts of spousal support being paid, because there is less money to go around without the tax incentive. The reason for this is that the recipient is typically in a lower tax bracket and therefore pays less money in taxes on those dollars, while the payor got to “write off” the money being paid and reduce his or her tax bracket, as well. Now, the payor spouse will bear all the brunt of the tax payments.

This change is significant, because beginning January 1, 2019 neither child support nor spousal support will be considered tax deductible. The tax deductible nature of spousal support was a useful bargaining chip for both sides of the table.

Questions? Give Us A Call

If you have any questions about how this law may impact your situation, please give one of our lawyers a call at (614) 567-3031. We will be happy to schedule an initial consultation to discuss your particular case. The cost of your initial consultation will be credited back to you if you hire someone from our firm to represent you.