If you’ve been keeping up with the news about the tax bill recently passed by both houses of Congress and signed into law, you may have questions about how the new law will impact your taxes. For those who either pay spousal support or those who receive spousal support, there are probably questions about the new tax law and spousal support.
Let’s take a look at the answers to some common questions.
How Will the Tax Law Affect My Spousal Support Order?
The newly enacted tax bill signed into law by President Trump eliminates one very important part of California divorce law that existed for more than 75 years: the ability to deduct spousal support payments from the income of the paying ex-spouse and the requirement that the payee claim this support as income.
After Jan. 1, 2019, all clients in divorce cases that include spousal support will need to be advised that the payor cannot deduct these payments and the payee does not need to claim them as income, just as with payments of child support.
Thus, the payor’s tax burden will increase and the payee’s burden will decrease, leading to the possibility of protracted litigation over the issue, particularly as the court must consider the immediate and specific tax consequences to the parties under Family Code section 4320, subsection (j) when establishing long-term spousal support.
Looking at the tax bill as written, it is clear that Congress intended to and did eliminate many tax deductions—and the provision to repeal “alimony” deductions is part of that package. For more information, refer to the Tax Bill H.R. 1, subtitle D, section 1309.
The Bottom Line Related to the Tax Law and Spousal Support
Keep in mind that these changes do not affect California divorce cases that are completed and go to judgment during 2018, which should give clients and attorneys plenty of incentive to settle or conclude cases during the upcoming year.
If you are a payee, however, there may not be a lot of reason to finish a case during 2018, given the fact you will be receiving extra non-taxable income if your spousal support order goes into effect on Jan. 1, 2019 or later.
Contact a San Diego Divorce Lawyer About Spousal Support
Alimony can be a complicated issue, but it is an important issue to understand for both parties. An experienced divorce attorney can help you understand how spousal support can affect you in a San Diego divorce and can even help you understand some of the potential tax consequences that may accompany alimony.
If you are considering divorce or have already made the difficult decision to pursue divorce and have questions, contact JWB Family Law to schedule a free consultation where you can find out more information about the San Diego County divorce process and how spousal support might affect you.