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What to know about spousal support and taxes

On Behalf of | Jan 15, 2020 | Divorce And Dissolution, Spousal Support, Tax Matters Related To Termination Of Marriage |

The prospect of splitting one household into two in a divorce can cause uncertainty. Understandably, each spouse 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 is not guaranteed in each Ohio divorce. However, due to the new tax law affecting divorces and dissolutions post-2018, it is important to understand how paying or receiving spousal support 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 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; and
  • The tax consequences of potential spousal support on each party.

After considering these and other factors, the court will decide to award or deny spousal support. If awarded, the court then determines the duration or the support order and the amount of payments for one spouse to pay to the other.  It will also determine the circumstances under which spousal support may later be modified or terminated.

Changes to the tax law

For those with court orders or agreements executed before 2019, spousal support payments can be tax deductible for the payer and qualify as taxable income for the receiver. These rules remain unchanged with 2019’s new tax law.  If you fall into this category, you can preserve the tax-deductible nature of your spousal support payments, even if you modify spousal support now.

For those with court orders or 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 will not include the payments in their taxable income. These changes can be substantial for both parties.

Be sure to discuss the tax consequences of and options for spousal support with your attorney.  He or she can assist in advocating for your long-term interests and financial stability.