17 Dec What Are the Tax Implications of Spousal Support in WA?
Navigating a divorce is never easy, and when finances get involved, things can get complicated quickly. If spousal support (also called maintenance or alimony) is on the table, you’re likely wondering how those payments will affect your taxes, whether you’re making or receiving them. Tax laws have shifted in recent years, so understanding the current rules is essential for planning your financial future. Read on to explore the tax implications of spousal support that are relevant to Washington State cases.
The Shift in Federal Tax Law
Before 2019, the person making alimony payments could deduct these costs, and the person getting the payments had to file them as taxable income. However, this changed in 2017.
If your divorce or separation agreement was executed after December 31, 2018, the federal tax treatment is as follows:
- Payers cannot deduct payments. You pay spousal support with after-tax dollars. It does not lower your taxable income.
- Recipients do not report payments. You do not need to count spousal support as income on your federal tax return.
This change simplified filing for many, but it also removed a significant negotiating lever. Previously, high-earning spouses were often more willing to agree to higher support amounts because of the tax break. Now, every dollar paid is a dollar lost, which can make negotiations tougher.
What About Agreements Before 2019?
If you finalized your divorce on or before December 31, 2018, the previous rules likely still apply. That means the payer can deduct the payments, and the recipient must report the payments as taxable income.
However, there is a catch. If you modify your pre-2019 agreement now, the new tax rules might apply if your modification specifically states that the Tax Cuts and Jobs Act applies. Therefore, be extremely careful when updating old support orders. A simple modification could unintentionally flip your tax liability.
State Taxes in Washington
Washington is one of the few states with no personal state income tax. Consequently, you don’t need to worry about reporting spousal support on a state return, regardless of whether you are the payer or the recipient. This simplifies things locally, but federal taxes remain a concern.
Why You Need a Strategy
Since tax deductions are no longer a bargaining chip for new divorces, structuring a fair agreement requires a different approach. Washington courts look at factors like marriage length, financial need, and ability to pay—but they don’t strictly calculate for tax impact. That is where a legal strategy becomes vital.
A skilled attorney can help you look at the big picture. For instance, you might trade spousal support for a larger share of property, retirement accounts, or other assets that have different tax implications.
Let’s Discuss Your Case
Divorce finances are tricky, and you need a plan tailored to your specific assets and income. At LaCoste Family Law, we help clients in Kennewick, Pasco, and Richland navigate these complexities. Contact us today to speak with a spousal support attorney who can help you secure a fair financial future.