Family Law Corner: Tax Deductible Spousal Support Cause Glee

Despite her impending divorce and her wife’s request for spousal support and attorney’s fees, “Glee” star Jane Lynch has one thing to be gleeful about:  her spousal support payments will now be tax deductible.  Given her estimated salary of $50,000 per episode of “Glee,” and not including her Broadway run in “Annie” or her numerous film appearances, this deduction may be nothing to sneeze at.  

Lynch was married to Florida psychologist Dr. Lara Embry in Massachusetts in 2010 and they registered for a domestic partnership in California shortly thereafter.  In late July 2013, Lynch filed for divorce in Los Angeles, a month after the U.S. Supreme Court issued its 5-4 decision in U.S. v. Windsor, holding that Section 3 of the Defense of Marriage Act (DOMA) is unconstitutional.  By defining "spouse" to mean a heterosexual couple in a recognized marriage, Section 3 codified non-recognition of same-sex marriages for all federal purposes, including taxation.  This meant same sex couples did not get the benefit of deducting spousal support paid when dissolving their marriages.  The IRS followed up on Windsor by announcing on August 29, 2013 that same-sex couples who were legally married in a state or jurisdiction that recognizes same-sex marriages will be treated as married for federal tax purposes. (Revenue Ruling 2013-17).

Before Windsor, there was considerable disagreement about the tax consequences of spousal support paid in same-sex dissolutions.   In 1917, the United States Supreme Court held that spousal support was not taxable to the recipient and not deductible by the payor. See Gould v. Gould, 245 U. S. 141 (1917).   This “common law” rule was reversed in 1942 federal legislation, which enacted the concept of taxable spousal support income and deductible spousal support payments (now codified in Internal Revenue Code Sections 71 and 215).  Since those statutory provisions only applied to spouses and since under DOMA spouses could not be of the same-sex, those provisions did not apply to same-sex divorces.  

Thus, experts struggled with whether same-sex spousal support payments were income to the recipient—there was no question that they were not deductible, but to be safe with the IRS, some advised that they were taxable income.  However, many experts referred back to case law pre-dating 1942 in finding that for same-sex divorces, spousal support was not taxable income (pursuant to Gould). Now that the IRS has formally acknowledged Windsor, same-sex divorcing spouses have one less thing to be concerned about and Lynch can safely deduct any support payment she makes.