Are Spousal Support Payments Taxable Income in Washington State?
When there is a significant disparity between the current and future financial prospects of each partner, spousal support (spousal maintenance, alimony) may be awarded in a Washington divorce. Spousal support is one of many potential financial considerations for couples going through a separation. The tax consequences of a divorce should not be overlooked.
This raises an important question — is alimony taxable income? For divorces in Spokane, the answer is ‘no’—federal law recently changed the tax treatment of spousal support payments and Washington lacks a state income tax. Here, our Spokane divorce attorney explains the key things to know about spousal support payments and taxes in Washington State.
Federal Law: Alimony is No Longer Taxable Income for the Recipient
The Tax Cuts and Jobs Act of 2017 (TCJA) was signed into law in December of 2017. A comprehensive tax reform package, the legislation changed the taxation of spousal support payments. Under the old system, alimony payments were tax deductible for the paying spouse and taxable income for the receiving spouse. In effect, this means that alimony was previously paid in “pre-tax” dollars. The TCJA changed the system. Alimony is now paid in post-tax dollars.
Under current federal law (2021), spousal support is not taxable income for the recipient. As explained by the Internal Revenue Service (IRS), any divorce/separation executed after 2018 is subject to the new tax treatment standards created by the TCJA. The IRS emphasises that “alimony and separate maintenance payments you receive under such an agreement are not included in your gross income.” In other words, spousal support is no longer taxable income under federal law.
Note: The alimony-related federal tax law changes created by the TCJA are not retroactive. This means that divorce agreements entered prior to January 1st, 2019 can still fall under the olds regime. For older divorce agreements, alimony may still be tax deductible to the payor and taxable income for the recipient.
State Law: Washington Does Not Have a State Income Tax
Spousal support has no direct impact on either party’s state taxes in Washington. As explained by the Department of Revenue for Washington State, the jurisdiction “does not have a personal or corporate income tax.” Instead, state funds are primarily derived from sales taxes, property taxes, the business and occupation (B&O) tax, and the public utility tax. The spouse who receives alimony does not need to report it as taxable income for the purposes of state-level taxation.
Call Our Spokane, WA Spousal Support Lawyer for Help With Your Case
At Hodgson Law Office, our Spokane family law attorney is a skilled, solutions-oriented advocate for clients. If you have any questions about spousal support and taxes, we are available to help. Contact our legal team today for a strictly confidential consultation. With a law office in Spokane, we provide family and divorce representation throughout all of Eastern Washington, including in Spokane County, Lincoln County, Whitman County, Stevens County, Adams County, and Pend Oreille County.