How Does the New Tax Law Affect Spousal Support in Virginia?

Many people are concerned about how the new federal tax law is going to impact their taxes. What some people do not yet realize is that the tax law is also going to have a drastic impact on spousal support numbers in divorces.

Currently, the individual paying spousal support is able to claim the payments as a deduction on their taxes. The individual receiving support is then obligated to declare the support as income. (As always with taxes though, there are exceptions).

The new tax law states that, for orders entered starting January 1, 2019, the paying individual will no longer able to claim the deduction, and the receiving individual will no longer be required to pay taxes on spouse support received.

With that said, if you modify an agreement or divorce decree that was entered under the old law, you are still governed by the old law allowing for deductions and income unless both you and your ex opt-in to the new law. That means that the applicability of the tax law is yet another negotiation point when the time comes for modification. The paying spouse will want to maintain the support under the current regulations, while the receiving spouse will likely want to opt-in to the new laws.

The new tax law will make the date of entry of divorce and spousal support orders very significant around the end of  the year 2018.                                                                               

The new tax law is not retroactive. Therefore, if you have a divorce decree or settlement agreement that is executed on or before December 31, 2018, the new law does not apply to you (for now). As many people know, however, it is not uncommon for circumstances to change and depending on the settlement or court decision, support may be later modified.

Aside from the above implications, spousal support determination in Virginia remains unaffected. See our post on the subject to better understand generally who gets spousal support, for how long, and how much.

People often ask if the new laws will change child support as well. Interestingly, the current tax laws relating to child support mirror the new spousal support laws in that paid support is not deductible and received support is not treated as income. So, the short answer is no, there is no change to child support. The long answer is that spousal support is a factor used to determine child support. Therefore, there may be additional negotiations and factors to consider when determining child and spousal support starting January 1, 2019.

Regardless of whether you are paying or receiving support, it is clear that there are significant changes ahead. Many of the practical aspects of the change will have to be ironed out. It is important to have legal guidance to navigate these waters. At PJI Law, we are dedicated to staying abreast of the new changes in the law and helping our clients address those changes head on. If you would like to schedule a meeting to discuss, we would be happy to review your situation and go over your options with you.