What is Spousal Support?
Spousal support is a series of payments to a separated or ex-spouse according to a divorce decree or separation agreement.
How Does Spousal Support Work?
Generally, to receive spousal support, a spouse must have been financially dependent on the other spouse for most of the marriage. Although calculations and standard amounts vary by state, each party's ability to earn money, the length of the marriage, the conduct of the parties, and health and age all affect the amount.
Spousal support is usually payed monthly. For tax purposes, noncash payments and voluntary, extra payments do not count as spousal support. However, payments to a third party on behalf of the ex- or separated spouse sometimes qualify as spousal support (medical expenses, housing costs, tuition, etc.).
Why Does Spousal Support Matter?
Spousal support matters because it has significant tax consequences for both payers and receivers. Most notably, spousal support is tax-deductible for the payer and taxable for the receiver. Because of this tax deduction (and the resulting temptation to mask all payments to an ex as spousal support), the IRS applies two tests to ensure that the payments are not really child support or property settlement payments (which are not deductible). For this reason, spousal support payments should be explicitly described in the divorce decree or separation agreement, and they must be labeled 'spousal support.' Otherwise, the IRS may tax child support as spousal support.
Also, spousal support to an ex- or separated spouse typically only counts as spousal support for tax purposes in years when the parties did not file a joint tax return or live in the same dwelling. If spousal support payments decrease or terminate during the first three years, filers may be able to recapture the taxes paid (and deductions claimed) under the IRS's recapture rule. In any case involving spousal support, both the spousal support payer and spousal support receiver have to file an IRS Form 1040 instead of a 1040A or 1040EZ.