Spousal support: then and now

Spousal support is a payment or series of payments made from one former spouse to another after the termination of a marriage. The purpose of these payments is to offset economic hardship that may be caused by the loss of a shared income household.

Courts do not order spousal support in all matters, and the amount of an order can vary greatly. A court will consider many factors when determining these and other details about a spousal support order.

How is spousal support determined?

Some factors that may affect spousal support include, but are not limited to:

• Each spouse’s income;
• Each spouse’s earning abilities;
• The duration of the marriage;
• The standard of living during the marriage; and
• Each person’s contribution to the other person’s earning potential.

The court may also consider the tax consequences that each spouse may experience because of spousal support, which have recently changed.

How have the tax consequences changed?

For many years, spousal support payments were tax-deductible by the person paying support (the “Payor”) and taxable to the person receiving support (the “Payee”). The effect of this was that the tax obligation for the money paid as support shifted from the Payor to the Payee, which often meant that it shifted from the higher-wage-earner to the lower-wage-earner. In the event that the Payee is the spouse in a lower tax bracket, he or she would pay fewer taxes on the money paid as support than the Payor would have paid as the higher wage earner. More often than not, this was the case.

Now, the tax obligation has reversed. For those with divorces or dissolutions finalized in or after 2019, spousal support payments are no longer tax-deductible for the Payor or taxable to the Payee. Because the Payor is often taxed at a higher rate, less of the spousal support award may end up reaching the Payee.

This change can have a significant effect on the Payee. However, every situation is different.

If you have questions regarding spousal support, you should speak with an attorney. Depending on the circumstances, there may be creative strategies that can help you and your spouse reach a more favorable outcome.