Do You Have to Pay Taxes on Spousal Support?

When going through a divorce or separation, spousal support (also known as alimony) is often part of the financial arrangement. One common question many people have is whether they need to pay taxes on spousal support payments they pay or receive, and the answer depends on the timing of your divorce.

What is Spousal Support?

Spousal support is financial assistance provided by one spouse to the other after a divorce or separation. The purpose is to help the lower-earning spouse maintain a similar standard of living to that enjoyed during the marriage.

There are two main types: temporary and permanent. Temporary support is awarded during the divorce process, often to maintain financial stability until the final settlement is reached. Permanent support may be awarded after the divorce is finalized, typically when one spouse is unable to support themselves due to factors like long-term health issues or lack of work experience.

Tax Treatment of Spousal Support

The tax treatment of your spousal support payments depends on when your divorce was finalized.

Divorces Finalized Before 2019: If your divorce was finalized on or before December 31, 2018, spousal support payments follow the pre-Tax Cuts and Jobs Act rules. The person making the payments can deduct them from their taxable income, reducing their overall tax burden. The recipient is required to report the payments as taxable income and pay taxes on them.

Divorces Finalized After 2018: This changed with the Tax Cuts and Jobs Act of 2017. If your divorce was finalized on January 1, 2019 or later, spousal support is no longer deductible for the paying spouse, nor is it considered taxable income for the recipient.

Special Considerations

Divorcing couples can still negotiate terms that address the financial impact of these changes. One way to contract around the tax treatment is by including provisions in the divorce agreement that adjust the amount of spousal support to account for the loss of tax deductions. For instance, the paying spouse may agree to provide a higher amount of spousal support to offset the fact that it is no longer deductible.

Consult a Professional

We encourage those with questions about the tax implications of their spousal support payments to consult a tax or accounting professional. If you have questions about spousal support or need guidance through the divorce process, contact an experienced attorney today.