CHANGES IN THE TAX LAW Spousal Support No Longer Tax Deductible
One of the more complicated and uncertain aspects of divorce is how much spousal support, also called alimony, a party will have to pay. Maine law does provide some guidance, but not a great deal. 1
The law presumes that there will be no general ongoing spousal support if the marriage lasted less than ten years. If the marriage lasted between ten and twenty years and there is a significant disparity in the parties’ incomes, the law presumes spousal support will be paid by the higher wage-earner for half the length of the marriage. If a disparity in income is present in a marriage lasting more than twenty years, spousal support can be ordered indefinitely. These are statutory presumptions; this means that unless there are unique facts that justify some deviation, the Court will follow these general rules.
Obviously, the length of time spousal support is paid is important, but equally significant, is the amount to be paid. Here, the law provides lots of general principles but very little in the way of specific guidance. Child support is far simpler: the amount is determined by a formula based on the parties’ incomes, the costs of insurance, and the cost of child care. Plug these numbers into an equation and out comes the figure to be paid by the parent with whom the children spend less than half of the time. There is nothing close to this predictability with spousal support.
The amount of spousal support a higher wage-earner is required to pay is often a difficult pill to swallow, but one small benefit that helps make it more tolerable is the fact that the person paying spousal support can deduct the amount paid from his or her income for tax purposes. That is about to change.
Beginning in 2019, the party paying will no longer get to claim a tax deduction for spousal support payments. 2 This change in the law does not apply to divorce judgments or separation agreements executed on or before December 31, 2018. This should provide incentive to those who fear they may have a significant spousal support obligation to get their family matter resolved in the next several months or risk losing a substantial tax benefit.
If an existing spousal support order is modified after December 31, 2018, the spousal support paid after the modification can still be deducted from the payer’s income unless the modification expressly states that the new law will apply to the modified order, in which case spousal support will not be deductible from the paying party’s income.
As stated above, spousal support is a complicated matter, and recent changes to the tax code have made it even more complicated. For answers to questions about these issues, we encourage you to contact an experienced family law attorney.
1 Maine’s spousal support law is long and complex. The full text can be found at http://www.mainelegislature.org/legis/statutes/19-A/title19-Asec951-A.html.
2 The applicable text of the tax reform bill passed by Congress late last year can be found here, for those interested https://www.congress.gov/bill/115th-congress/house-bill/1/text.