Spousal Support and Tax Laws Until Now

A spouse may ask for spousal support in a divorce case if they have been married for a substantial amount of time and there is a big difference between the two parties’ income, or if one party does not earn any income.

Historically for tax purposes, any spousal support paid to the recipient was treated as income for the recipient spouse and tax-deductible to the spouse who paid it (payor spouse). Traditionally, husbands would pay this type of support to their former wives. Due to the tax deductible treatment of spousal support, Husbands may have been more willing to pay spousal support knowing that this favorable tax treatment was available.

Moving Forward

However, as per the new tax laws, spousal support will not be considered and taxed as income to the recipient spouse and will not be considered tax-deductible to the payor spouse. It should be noted that these laws will only apply to new orders for spousal support, not existing orders as the new tax laws go into effect for the 2018 tax returns filed in 2019.

The fact that spousal support is now not considered income to the recipient spouses will help them as they will not have to pay any tax on the support they receive. However, at the same time, the new tax laws will adversely affect the payor spouses.

This change may result in the payor spouses wanting to lower the amount of spousal support to account for the taxes they have to pay because the support is no longer deductible for tax purposes.  Further, this may ultimately have the effect of spouses litigating spousal support matters rather than coming to a settlement regarding the issue.Previously, lawyers used the tax deductible benefit of the spousal support to the payor spouse as a bargaining chip to settle spousal support issues. This bargaining chip is no longer available to attorneys who may be working towards a settlement.

Problems For The Recipient Spouse

Another potential problem that may arise because of the change of the tax law is that the spouses will not be on equal footing to negotiate spousal support matters. If the payor spouse refuses to settle the case and insists on litigating the matter and going to trial, the spouse requesting spousal support who may not be able to afford paying attorney’s fees for extensive litigation may settle for a lower spousal support. The higher-earning spouse can take advantage of his or her superior socioeconomic position by forcing the other spouse to waste his or her limited income or resources on prolonged litigation.

In Virginia, whether or not spousal support is awarded and how much is awarded depends on many factors. While Virginia has guidelines to help determine whether spousal support will be ordered, there are no bright line rules, formulas, or worksheets. Unlike child support, there is no formula to determine the amount of support.

At Khanna Law we are intimately familiar with the Virginia guidelines considered in establishing spousal support awards as well as the tax consequences related to spousal support matters. We pride ourselves in guiding you, protecting your rights and providing dedicated, intelligent and reliable representation.

To schedule a consultation regarding your spousal support case, call 571-766-6860 or email us at pkhanna@khannalaw.com

We are located at 12110 Sunset Hills Road, Suite 600, Reston, VA 20190 and serve Fairfax, Loudoun, Arlington, Prince William and other Northern Virginia Counties.