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Spousal support and divorce in 2019

There has been a change to the United States tax system with the implementation of the Tax Cuts and Jobs Act (TCJA). This law resulted in major tax reform. The TCJA essentially doubled the standardized deduction rate and gave business owners new rules to follow when filing returns.

Another area impacted by changes to tax law: divorce. The TCJA impacted divorce in many ways, but the most notable change involves spousal support.

What is spousal support? Spousal support, also known as alimony, involves a higher earning spouse providing a payment to the lower earning spouse. The amount of spousal support and duration of the payments varies depending on a number of factors including the length of the marriage and income discrepancy.

Negotiations for spousal support also take into account the tax implications of the payments. In the past, the paying spouse would receive a tax benefit. This spouse could take a tax deduction for the support payment.

The TCJA removed this deduction.

Why the change? Critics point to the fact that the change results in a higher tax bill. If the spousal support payment remains the same, the government will benefit. This is because the alimony payment will now be taxed based on the higher income earning spouse’s tax bracket — which is very likely a higher bracket than the lower earning spouse who would receive the payment and paid the tax under the old law.

What does this mean? It will likely be much more difficult for a recipient spouse to negotiate a larger spousal support payment going forward. As such, it is important to ensure all assets are taken into account during the divorce proceeding to better ensure a fair split.