The prospect of splitting one household into two in a divorce can cause much uncertainty. Each spouse understandably seeks to protect their long-term interests, especially when it concerns financial matters. One of the most contested financial components of a divorce can be the determination of spousal support.
Spousal support, or alimony, is not a guarantee in each Ohio divorce. However, due to the new tax law affecting post-2018 divorce agreements, it is important to understand how paying or receiving alimony could influence your financial picture.
Factors considered by Ohio courts in awarding spousal support
Unlike child support payments, there is no pre-calculated formula to determine spousal support payments. Rather, Ohio courts first examine many factors, including:
- The income and relative earning capabilities of each party
- The age and physical, mental and emotional conditions of each party
- The duration of the marriage
- The standard of living set during the marriage
- The contribution of each party throughout the marriage
- The tax consequences of potential spousal support on each party
After considering these and other factors, the court decides to award or deny spousal support. If awarded, the court then determines the duration and amount of payments for one spouse to pay to the other.
Changes to the tax law
For those with divorce agreements executed before 2019, spousal support payments are tax deductible for the payer and qualify as taxable income for the receiver. These rules remain unchanged even with 2019’s new tax law.
For those with divorce agreements executed on or after January 1, 2019, the new tax law applies to you. Payers of spousal support may no longer deduct such payments while receivers no longer must include the payments as taxable income. These changes are substantial for both parties but particularly for the payer, who now must pay income tax on the payments.
Notably, these changes may apply to pre-2019 divorce agreements if the divorced couple seeks a modification to the spousal support payments. Due to this, payers in particular will want to consider the potential tax consequences of seeking a modification.
For those currently facing a divorce, if you expect to pay spousal support, MarketWatch advises leveraging this during the negotiation of your divorce agreement. If you expect to receive spousal support, anticipate pushback from the other side on other financial components. An attorney can assist in advocating for your long-term interests and financial stability.