Is Spousal Support Always Taxable? Understanding Post-2019 Divorce Tax Rules
Divorce brings major changes to every part of life, from where you live to how you budget for the future. One of the most confusing areas involves taxes. Many people feel caught off guard when they learn that the rules around alimony and filing statuses have shifted. If you’re already dealing with the strain of separation, sorting through new tax rules can feel overwhelming.
At Smolka Law Group, based in Palatine, Illinois, we help clients review their financial situation, explain how the new tax laws apply, and create strategies that make sense for their lives moving forward. If you’re facing divorce, it’s important to know how changes can influence your obligations and opportunities. Reach out to us to discuss your situation.
How the Tax Cuts and Jobs Act Changed Divorce Law
The Tax Cuts and Jobs Act (TCJA), which went into effect in 2019, reshaped how divorce settlements are taxed. These changes remain one of the biggest financial shifts for divorced individuals in decades. Divorce law now connects more closely than ever with federal tax rules, meaning divorcing spouses need to consider how settlements will play out.
Key adjustments included the removal of the alimony deduction for the payer, changes to how recipients report alimony, and updated rules around child-related deductions. Since these changes affect both short-term and long-term finances, we guide clients through evaluating settlements with tax consequences in mind.
Alimony Payments and Tax Implications
One of the most significant shifts after 2019 involved alimony. Before the law changed, the person paying alimony could deduct those payments from taxable income, while the recipient had to report the money as income. Now, neither side can use alimony in this way for divorces finalized after January 1, 2019.
Important points to remember about alimony and taxes:
No deduction for payers: Alimony payments are no longer tax-deductible for the paying spouse.
No taxable income for recipients: The receiving spouse doesn’t have to report alimony as taxable income.
Applies to new divorces only: These rules affect divorces finalized after January 1, 2019. Older agreements may still follow the previous system.
Modification rules apply: If an older divorce agreement is modified after 2019, and the change states the new rules apply, the updated tax treatment kicks in.
These rules change the way spouses approach settlement negotiations. Since alimony doesn’t reduce taxable income for payers anymore, there’s less incentive to agree to higher payment amounts. We work with clients to explore fair arrangements while accounting for the way divorce law intersects with these tax rules.
Child Support and Dependent Credits
Child support has never been deductible for the paying parent or taxable for the receiving parent, and that continues under current rules. However, changes to tax credits have altered how parents approach negotiations about who claims children as dependents.
Current rules about children and tax credits include:
Child tax credit eligibility: The credit is available to qualifying children under age 17 and provides up to $2,000 per child.
Phase-out thresholds: Higher income levels reduce or eliminate credit eligibility.
Assignment of credits: Only one parent can claim a child as a dependent per year, so agreements often outline which parent claims which child.
Head of household status: The parent who provides the majority of a child’s support may qualify for this filing status, which usually offers lower tax rates.
Deciding who claims children requires careful planning because the benefit can be substantial. We help parents in Palatine and across the Greater Chicago Area evaluate these options and create agreements that maximize financial stability for both households.
Property Division and Tax Treatment
Another area where divorce law connects with taxes is property division. Splitting assets involves more than dividing bank accounts; it requires an understanding of potential tax consequences.
Key property-related tax considerations include:
Capital gains on real estate: Selling the marital home may trigger capital gains taxes if profits exceed exclusion limits.
Retirement account transfers: Moving funds from one spouse’s retirement account to the other can be tax-free if done correctly through a Qualified Domestic Relations Order (QDRO).
Investment assets: Dividing stocks, bonds, or other investments can have future tax consequences when sold.
Debt division: Allocating debt responsibility doesn’t change liability to creditors, which can lead to credit and tax complications if payments are missed.
We review the tax implications of each property type so clients know the true value of what they’re receiving. This prevents surprises, reduces unexpected costs, clarifies financial outcomes, and helps create fairer settlements.
Filing Status Options After Divorce
Your filing status affects everything from tax brackets to deduction eligibility. Divorce law intersects with IRS filing rules in ways that can influence both short-term and long-term finances.
Filing status considerations include:
Single: Available for anyone unmarried as of December 31 of the tax year.
Head of household: Available if you provide the main home for a qualifying child or dependent for more than half the year.
Married filing jointly or separately: Still available if you were legally married for the tax year, even if separated.
Choosing the right filing status can change your tax bill dramatically. We walk clients through their options to avoid errors, reduce unnecessary costs, maximize deductions, plan strategically, and simplify future filings.
Common Mistakes to Avoid
Tax changes tied to divorce law can be confusing, and mistakes are easy to make. Knowing what to avoid helps prevent costly errors, reduce stress, protect finances, maintain compliance, and support smoother settlements.
Frequent mistakes include:
Failing to update withholding: Divorce changes your taxable income and may require adjustments to payroll withholding.
Ignoring deadlines: Missing tax filing or divorce court deadlines can create penalties.
Overlooking retirement accounts: Dividing these accounts without a QDRO may lead to early withdrawal penalties.
Not coordinating with professionals: Taxes, divorce law, and financial planning overlap—failing to seek help can leave money on the table.
We encourage clients to keep these pitfalls in mind and work closely with legal and financial professionals to safeguard their interests, protect long-term financial stability, minimize risks, and create stronger agreements.
Planning for Future Tax Seasons
Divorce doesn’t just affect the year it happens—it sets the stage for years to come. Proactive planning reduces stress, provides clarity, protects financial interests, anticipates challenges, and creates long-term stability.
Helpful steps for future tax planning include:
Keep thorough records: Save divorce decrees, QDROs, and settlement agreements for future tax filings.
Review your budget: Revisit income and expenses to reflect new tax realities.
Plan for life changes: Consider remarriage, relocation, or changing jobs, and how they’ll impact your taxes.
Revisit your estate plan: Divorce may affect wills, trusts, and beneficiary designations.
We help clients across the Greater Chicago Area look ahead and prepare for the tax implications of life after divorce, building financial clarity, reducing uncertainty, and supporting informed decisions that strengthen future stability.
Contact an Experienced Divorce Lawyer
Divorce law affects more than custody and property—it shapes your tax future. With the post-2019 tax rules in place, it’s important to know how settlements, alimony, and credits will impact your life. At Smolka Law Group, we help people in Palatine, Illinois, and throughout the Greater Chicago Area sort through their options and avoid costly mistakes. Reach out today.
