What you need to know about alimony, how it’s determined, and how it can shape your financial future after divorce.
Spousal support—also known as alimony—is often one of the most misunderstood aspects of divorce. While not every divorce involves support payments, when it does, it can significantly impact both parties’ financial futures.
Whether you’re anticipating paying or receiving spousal support, it’s essential to understand how it works, how it’s calculated, and how it factors into long-term financial planning. Being informed helps you make better decisions and avoid surprises during what can already be a complex and emotionally challenging time.
What Is Spousal Support?
Spousal support is a court-ordered or agreed-upon payment from one spouse to another after a divorce or separation. Its purpose is to help the lower-earning or non-earning spouse maintain a standard of living similar to what was experienced during the marriage, especially if there’s a significant disparity in income or financial resources.
Spousal support is separate from child support, which is intended to support the needs of children.
Types of Spousal Support
There are different forms of spousal support, depending on the circumstances and the laws of the state in which the divorce is filed:
1. Temporary Support
Awarded during the divorce process to help the lower-earning spouse manage living expenses while proceedings are ongoing.
2. Rehabilitative Support
Granted for a defined period to allow the recipient time to become financially self-sufficient—often through education or job training.
3. Permanent or Long-Term Support
Typically awarded in long marriages where one spouse may never be able to become financially independent due to age, disability, or lack of work history.
4. Reimbursement Support
Intended to repay one spouse for financial contributions (e.g., supporting the other spouse through school or professional training).
5. Lump-Sum Support
A one-time payment instead of ongoing monthly payments, often used when parties wish to avoid future contact or administrative burdens.
How Is Spousal Support Calculated?
There is no one-size-fits-all formula. While some states use calculators to estimate temporary support, long-term or permanent alimony is usually determined on a case-by-case basis.
Courts often consider factors such as:
- Length of the marriage
- Each spouse’s income, assets, and earning potential
- Age and health of both parties
- Standard of living during the marriage
- Contributions to the household (including non-financial, like childcare)
- Education or training needs of the recipient
- Financial sacrifices made by either spouse (e.g., giving up career opportunities)
The goal is to achieve fairness, not necessarily equality. In some cases, spouses may reach their own agreement outside of court, but it still must be approved by a judge to be enforceable.
Tax Implications of Spousal Support
The tax treatment of alimony changed significantly under the Tax Cuts and Jobs Act (TCJA), which took effect in 2019:
- For divorces finalized before January 1, 2019:
- The payer can deduct alimony from their taxable income.
- The recipient must report alimony as taxable income.
- For divorces finalized on or after January 1, 2019:
- Alimony is not tax-deductible for the payer.
- Recipients do not pay taxes on the support they receive.
These changes make it even more important to work with tax professionals or financial planners to understand the after-tax impact of any alimony agreement.
How Spousal Support Affects Financial Planning
For the Payor:
- Budgeting: Monthly support payments must be factored into your ongoing expenses and may limit future spending or saving.
- Loan Applications: Support obligations may affect your debt-to-income ratio when applying for a mortgage or personal loan.
- Retirement Planning: Long-term support may require adjustments to your retirement timeline or savings strategy.
For the Recipient:
- Income Stability: Support may serve as a lifeline while transitioning into the workforce or recovering financially.
- Temporary Nature: Many support agreements are not indefinite. It’s crucial to plan for the eventual loss of this income.
- Savings and Investment: Don’t rely solely on support for long-term goals. Use it to stabilize your finances and begin building personal wealth.
Can Spousal Support Be Modified?
In many cases, yes. Spousal support can often be modified if there is a significant change in circumstances, such as:
- Loss of income or job
- Retirement
- Serious illness
- Remarriage or cohabitation (which may terminate support, depending on the agreement)
It’s important to review the terms of your support order or agreement carefully. Some arrangements include a non-modification clause, which means the amount and duration of support are fixed.
Protecting Yourself During the Process
Whether you’re negotiating support or already have a court order in place, consider the following:
- Work with a financial planner familiar with divorce to model different outcomes.
- Understand your state laws, as spousal support rules vary significantly.
- Document all financial information—income, expenses, assets, and debts.
- Don’t rely on verbal agreements. Always formalize support arrangements in writing and ensure court approval.
Final Thoughts
Spousal support can be a critical part of achieving financial fairness in divorce, but it also comes with long-term implications for both parties. Whether you’re paying or receiving, it’s essential to understand how support is determined, how it fits into your financial picture, and how to plan around it.
Taking a thoughtful, informed approach to spousal support—ideally with help from legal and financial professionals—can help you avoid surprises, reduce conflict, and create a stronger foundation for your post-divorce life. We recommend divorce financial planner.
