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Michigan Family Law Blog

Monday, May 11, 2020

Do I Have To Pay Taxes On Spousal Support I Receive?

Spousal support can be one of the most contested issues in a divorce case. Each spouse fights to ensure that he or she is paying or receiving a fair amount of spousal support. Because of recent changes in federal tax laws that impact spousal support, it is important to work with a Michigan divorce lawyer to protect your best interests. The amount of spousal support granted in your divorce case can significantly impact your future financial wellbeing and your standard of living.

How Did Changes in Federal Tax Laws Impact Spousal Support Payments?

Before the Tax Cuts and Jobs Act was passed, payors could deduct spousal support payments from their taxable income. Spouses receiving support payments had to report those payments as income on their tax returns and pay taxes on those payments. The Tax Cuts and Jobs Act changed that system.

For any cases decided on January 1, 2019, and beyond, recipients of spousal support payments receive those funds tax-free. They are no longer required to report spousal support as income on their tax returns.

However, payors of spousal support cannot deduct spousal support from their taxable income. Without this deduction, a payor could incur a much higher tax liability because the payor pays all the taxes on the support income.

The changes in federal tax law significantly benefit individuals who receive spousal support. For that reason, negotiating spousal support payments has changed. Before the changes in the tax law, the tax benefits for the payor could be leveraged when negotiating support payments. That is no longer a consideration in spousal support cases.

How is Spousal Support Decided in Michigan Divorce Cases?

Michigan does not have a statutory formula for calculating spousal support payments. Each case is decided based on the unique factors in that case. However, the Michigan Supreme Court has provided guidance on the matter. Through cases decided by the court, the court has specified factors that judges should consider when determining whether spousal support is warranted and how much to award for spousal support payments.

Factors used to determine spousal support in Michigan include:

  • The duration of the marriage;
  • The earning potential of the parties;
  • The resources and assets awarded to each party through property division;
  • The present financial situation of both parties;
  • The conduct and past relations of both spouses;
  • The standard of living enjoyed by the couple during the marriage;
  • The health and age of both spouses;
  • The difference in income between the parties;
  • The payor’s ability to pay support;
  • The receiver’s need for financial support;
  • The need to support the parties’ children, including adult children with special needs; and,
  • Other factors that help determine what is fair and equitable given the facts of the case.

The judge also uses the above factors to determine the duration of spousal support payments. Because there is not a standard formula for calculating spousal support payments in Michigan, the case rests with how the facts are presented in court. Working with an experienced attorney who understands divorce laws can help you protect your best interests.

Contact a Michigan Divorce Lawyer for More Information

If you have questions about spousal support or divorce law, contact our Michigan divorce lawyers for a confidential consultation. We are here to help you with family law matters, including divorce and support payments.


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