Spousal Support in Virginia and the New Federal Tax Law

Kathleen Farrell

The Tax Cuts and Jobs Act (“Tax Act”) was signed into effect in December of 2017. Before then, spousal support in Virginia was tax deductible to the payor, who is usually the higher income earning spouse. It was tax includable to the recipient spouse, who is the spouse with a lower income.  By shifting the income tax to the person in need, who is usually in a lower tax bracket, the overall tax was reduced. That made more money available for use as spousal support.

Changes Under the New Tax Act

The new Tax Act, under Section 11051, repeals the way spousal support payment was previously taxed.  The new law shifts responsibility for paying the tax to the payor spouse, who is generally paying tax at a higher rate.  The result is that more tax is ultimately paid. The consequence is that the payor has less income with which to pay spousal support.  There could be an adverse impact to the economically dependent spouse.

There is, however, still time to qualify for the prior tax treatment under certain limited circumstances.  If you are

  1.  a party to a spousal support order that is entered by a court on or before December 31, 2018, or
  2.  a party to a “separation instrument” that requires spousal support payments from one spouse to another,

then the spousal support payments would still be taxable to person receiving the spousal support and deductible by the spouse paying the support.  The IRS defines a “separation instrument” as a written separation agreement requiring a spouse to make payment for the support or maintenance of the other spouse.

Questions about Modifications of Spousal Support

There are still many questions about modifications of spousal support for prior orders and agreements on spousal support that were entered before December 31, 2018 but modified after December 31, 2018.   The most significant question is whether the court has the authority to order the spousal support modifications continue to be tax deductible by the payor and taxable to the recipient for modifications entered after December 31, 2018.

At Farrell & Croft, P.C. our attorney Kathleen Latham Farrell is experienced in family law including spousal support.  She is committed to providing you with the representation you need.  She will also assist you in identifying your goals and devise the best methods for achieving your objectives. Call her today for an appointment at 703-335-9390.

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