When planning for divorce, it is important to consider the tax implications that many decisions made during your divorce may have. One important factor to consider is how the tax code treats spousal support payments made from one spouse to the other.
If your divorce decree was entered before December 31, 2018, the support payor was permitted to deduct his or her support payments from his or her taxable income and the support recipient was required to include support payments in his or her taxable income. This rule allowed divorcing couples to shift taxable income from the higher earning spouse to the lower earning spouse, thereby leaving more money for both households combined and less money paid in taxes.
For couples with divorce decrees entered after December 31, 2018, support payments are no longer deductible by the payor nor are they taxable to the recipient. Under the new rule, both parties will have less after-tax money to spend as the support payor will pay more in taxes and thereby there will be less money available for support of the lower income spouse.