When two spouses decide to get divorced, they must settle various issues related to their relationship including the division of assets and debts, child custody, child support, and spousal support. Spousal support, or alimony, is often necessary in a divorce but it is important for both the paying and receiving spouse to understand the associated tax implications. To learn whether spousal support is considered taxable income in Tennessee, read on and speak with an experienced Memphis, Tennessee alimony lawyer today.
What is Alimony?
Alimony, also referred to as spousal support, is a financial payment that one spouse may be required to make to the other after a divorce or separation. This financial support generally comes in the form of monthly payments and its purpose is to help the lower-earning spouse maintain a similar standard of living after the marriage ends. Tennessee courts strive to ensure that a divorce does not financially devastate one spouse or leave them unfairly disadvantaged.
The amount and duration of the alimony depends on various factors including the length of the marriage, the receiving spouse’s income and earning capacity, the receiving spouse’s financial needs, the paying spouse’s ability to support them, and more.
Alimony is generally awarded when there is a significant difference in income and earning potential between the spouses or when one spouse sacrificed their career to support their family or care for children. The point of alimony is not to punish the paying spouse but instead to ensure financial fairness after the marriage ends.
Is Alimony Taxable Income in TN?
Before the Tax Cuts and Jobs Act of 2017 (TCJA) took effect, alimony payments were deductible by the paying spouse and were considered taxable income for the receiving spouse. However, since this act took effect in 2019, any divorce agreements that include alimony and were executed on or after January 1, 2019 state the opposite.
Any alimony payments ordered as a result of a divorce agreement after 2018 are no longer deductible by the paying spouse and are not considered taxable income for the recipient. Individuals receiving alimony from their former spouse are not required to report those payments as income when filing a federal tax return.
While alimony is not taxable income in Tennessee, these payments can still have tax implications for both spouses. It is always encouraged to consult with a tax professional and divorce attorney to ensure you are adhering to all required rules and regulations and to avoid any issues during tax season.
For more information and to obtain skilled representation during your divorce, reach out to a knowledgeable attorney at Rice Law today.
