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What are the tax implications of spousal support?

On Behalf of | Oct 12, 2021 | Divorce |

Spousal support could help someone struggling after a divorce to afford necessities. Newly divorced persons might appreciate the financial assistance, but they may not know if any tax consequences exist. Maryland residents might find it valuable to prepare for tax requirements related to alimony. Otherwise, they could receive a surprise bill in the mail at an inopportune time.

Fundamentals of spousal support taxation

The law changed regarding alimony taxation, and any alimony derived from a divorce finalized on or after Jan.1, 2018 does not need to report alimony as taxable income. Those whose marriages legally ended before that time must pay tax on alimony. Anyone who filed a return without reporting their spousal support could receive a letter stating that an additional tax assessment might be due.

Another change to the law affects ex-spouses who pay alimony. Before Jan. 1, 2018, payments were tax-deductible. That is no longer the case, meaning tax bills become higher for those whose divorce ended on that date or later.

Alimony is not the only support payment an ex-spouse may receive. Child support represents the other type of financial assistance, and it is not taxable. Child support is not tax-deductible, either. Those who make child support payments won’t find the obligation reduces their tax burden.

Negotiating spousal and child support

Couples might have concerns about spousal support payments. One party might want more, and the other looks to pay less. With child support, questions arise about needs and legitimate expenses. Both spouses could work out their differences during the settlement negotiation process to arrive at an agreeable figure.

Mediation might be an option for those who cannot agree to spousal or child support amounts. Sometimes, the divorce goes to trial, and the judge issues a decision. For many people, amicable negotiations work better.

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