2019 Changes in Spousal Support Tax Laws

For over 70 years, spousal support has been tax deductible for the paying spouse and counted as taxable income for the receiving spouse. Due to this tax law, divorcing spouses felt they had room to negotiate because sometimes paying more spousal support meant the paying spouse could save more money on his or her taxes. Sometimes, paying more spousal support could even help a paying spouse drop into a lower tax bracket.

But as of January 1, 2019, all of that will change. If you’ve been taking your sweet time on your divorce, you may want to push things along, especially if you’re a high-net worth individual who will be paying spousal support.

Under the new tax plan, which takes effect on January 1st, spousal support will no longer be tax deductible for the paying spouse, and the receiving spouse will no longer be paying income taxes on their spousal support payments.

Many divorce attorneys feel this change will make it harder to negotiate. What will probably happen is payers will try to pay less since they will no longer be entitled to the tax benefits. Payers are usually men, and they will be more negatively affected by this change in the tax law.

There’s a strong possibility that courts are going to start ordering amounts that are less than before because they’ll have to throw out the old way of doing things. Instead of considering the tax implications like they used to, they’ll just look at the numbers. And the changes will be the most apparent among wealthy couples.

Is the Change Retroactive?

No, it is not retroactive. So, if you’re already divorced, spousal support remains deductible for the paying spouse and taxable for the receiving spouse. The new law applies to all divorce and separation agreements finalized on or after January 1, 2019.

Related: My Spouse Works: Can I Avoid Spousal Support?