Are Spousal Support Payments Taxable Income in Washington State?

Divorce is a complex and emotionally charged process that’s frequently accompanied by a myriad of financial considerations. When it comes to the monetary aspects of a divorce in Washington State, one of the most critical and often confusing aspects is spousal support, also known as alimony or spousal maintenance.

Alimony is one of many potential considerations for couples going through a separation. The tax consequences of a divorce shouldn’t 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. In this post, our Spokane divorce attorney explains the key things to know about alimony 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 2017. This comprehensive tax reform package changed the way alimony payments are taxed.

Under the old system, alimony payments were tax-deductible for the paying former spouse and taxable income for the receiving spouse. In effect, this meant that alimony was previously paid in “pre-tax” dollars. The TCJA changed that — alimony is now paid in post-tax dollars.

Under current federal law (as of 2021), spousal support is not taxable income for the recipient. As explained by IRS officials, any divorce/separation executed after 2018 is subject to the new tax treatment standards created by the TCJA.

The IRS emphasizes that “alimony and separate maintenance payments you receive under such an agreement are not included in your gross income.” In other words, spousal maintenance is no longer taxable income under federal law.

It’s important to note that the alimony-related federal tax law changes created by the TCJA aren’t retroactive. This means that divorce agreements entered prior to January 1, 2019, can still fall under the old structure. For older agreements, alimony may still be tax-deductible to the payer and taxable income for the recipient.

State Law: Washington Doesn’t Have a State Income Tax

The financial landscape of divorce in Washington State is partly shaped by the fact that the state lacks an income tax.

According to the Washington Department of Revenue, the jurisdiction doesn’t have a personal or corporate income tax. State funds are primarily derived from sales taxes, property taxes, the business and occupation (B&O) tax, and the public utility tax.

This distinct feature significantly impacts the tax implications of alimony, providing a notable advantage for both the paying and receiving spouses.

Tax Considerations for Alimony Recipients in Washington

Unlike many other states where alimony payments are subject to income tax, Washington residents enjoy a simplified tax structure. The spouse receiving alimony payments isn’t required to report this income on their state tax return, as the state doesn’t impose a tax on personal income.

This translates to a direct financial benefit for the recipient, as their spousal support remains untouched by state taxes.

Tax Considerations for Alimony Payers in Washington

Similarly, the paying spouse doesn’t receive any state tax deductions for their alimony payments, which is offset by the fact that they don’t pay state taxes on the income used for these payments. This arrangement can lead to tax savings compared to states with income tax, in which deductions are often limited and subject to various regulations.

While federal tax laws have also evolved, with alimony no longer considered taxable income for the recipient for divorces finalized after 2018, the absence of a state income tax in Washington provides an additional layer of financial relief for those going through a divorce.

This unique aspect of Washington's tax system highlights the importance of understanding state-specific laws when navigating the financial complexities of divorce. A knowledgeable alimony attorney in Washington can provide valuable insights into how the state's tax laws can impact your specific situation and help you make informed decisions regarding spousal support.

Factors Influencing Alimony in Washington State

In Washington, a judge decides whether to award alimony payments, their duration, and the amount to be paid based on a variety of factors.

These typically include:

• The length of the marriage: Longer marriages generally result in longer alimony periods.
• Each spouse’s earning ability: If one spouse earns significantly more than the other, the court may order the higher-earning spouse to pay support to bridge the income gap.
• Both parties’ financial needs: The court will consider both spouse’s financial needs, including their expenses for housing, food, healthcare, and other necessities.
• Each spouse’s age and health: Older or disabled spouses may require longer-term alimony payments.
• The standard of living during the marriage: The court may try to maintain a similar standard of living for both spouses after the divorce.
• Each spouse's contributions to the marriage: This includes financial contributions, as well as efforts toward homemaking and child-rearing.
• Cohabitation with a new partner: If the spouse receiving alimony begins living with a new partner in a marriage-like relationship, it could be grounds for the termination or modification of alimony payments.
• Misconduct: In some cases, the court may consider marital misconduct, such as infidelity or abuse, when deciding on alimony payments.

It's worth mentioning that Washington law doesn't prescribe a specific formula for calculating alimony payments. Judges have considerable discretion to determine what’s fair and equitable in each case.

That’s why it’s crucial to have an experienced family law attorney on your side. Your lawyer can help you understand the relevant spousal support laws and promote your best interests throughout the legal process.

Consult Our Spokane Spousal Support Lawyers for Help With Your Case

The experienced family law attorneys at Hodgson Law Office pride themselves on being skilled, solutions-oriented advocates for their clients. If you have any questions regarding alimony and taxes, our team is available to help. Contact us today for a strictly confidential consultation.

We provide family and divorce representation throughout all of Eastern Washington, including Spokane County, Lincoln County, Whitman County, Stevens County, Adams County, and Pend Oreille County.