Cincinnati Family Law & Divorce Blog: Spousal Support Will No Longer Be Tax Deductible in 2019

Until the passage of the Tax Cuts and Jobs Act of 2017, spousal support payments were tax-deductible to the payor and taxable income to the payee. Now, that will change. For all spousal support orders entered after December 31, 2018, spousal support will no longer be tax deductible to the payor spouse and will be tax free to the payee spouse.

This change will have significant impacts on the amount of overall cash available to divorcing families. In most cases, the payor of spousal support is in a higher tax bracket and the payee is in a lower bracket. Thus, when the support is taxed to the payee, a lower total amount of tax is collected. Now, tax on spousal support payments will be paid by the party in the higher tax bracket, resulting in more overall tax being paid on the support funds and less after-tax cash available to the family.

There is an exception in the law for spousal support orders made before December 31, 2018, but which are subject to future modifiability. Under the new provision, these modified amounts will remain deductible to the payor spouse so long as the order itself was in place by the end of 2018 and specifically states that any modified awards will be subject to the same tax treatment and not the new provisions.