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How is spousal support taxed?

Spousal support is generally tax-deductible for the paying spouse and taxable income for the supported spouse. There are certain problem areas that parties should be aware of, however. For example, certain drafting requirements are necessary for a payor to obtain the tax deductibility benefit. The payor could otherwise end up losing the deductibility. Payors must be aware of accelerated “step downs,” which could lead to the unwanted and financially difficult consequence of “recapture.” Finally, same-sex married persons—or registered domestic partners—must consult with experienced counsel and accountants as deductibility rules are not accepted for these partners because of the federal Defense of Marriage Act (DOMA).