Lump Sum Retroactive Spousal Support: Tax Consequences

When a court orders that one of the parties are entitled to a specific amount of spousal support in accordance with the SSAG, the Court will also award a lump sum retroactive spousal support award from the date of the application until the present day.

The first issue is how the Court determines said amount.

At first glance, it seems reasonable and obvious that the Court would multiply the amount awarded in spousal support per month by the amount of months in arrears. However, in reality, that is not a fair and reasonable figure as it does not take into account the fact that monthly spousal support payments are deductible to the payor and taxable to the recipient. Therefore, decisions such as Hume v. Tomlinson, Elgner v. Elgner, and Vanasse v. Seguin, stress that the Court has an obligation to consider the tax consequences when ordering a lump sum retroactive spousal support award.

In Thompson v. Thompson, the Court explained its position on the matter as follows:

"The quantification of retroactive spousal support, the range that is generated by the SSAG must be adjusted because these ranges are based upon periodic ongoing payments which are presumed to be taxable in the hands of the recipient and tax deductible by the payor. A retroactive award must be netted down to account for its non-taxable status in the recipient's hands, and its non-tax deductible status in the payor's hands."

To learn more about lump sum retroactive spousal support as well as the services provided by Krol & Krol, call 905.707.3370 today.