For over 70 years, spousal support, otherwise known as “alimony” in some states, was tax-deductible to the paying spouse and counted as taxable income by the receiving spouse. But as of January 1, 2019, all of that was changed under federal law.
As of January 1, 2019, spousal support (alimony) is no longer tax-deductible for the paying spouse and receiving spouses no longer count it as taxable income. This new law only applies to all divorce decrees and legal separations executed after December 31, 2018.
For all individuals who entered into legal separations or divorce agreements on or before December 31, 2018, the old laws will still apply. Spousal support will still be tax-deductible for paying spouses and counted as taxable income by receiving spouses.
Divorces & Separations After December 31, 2018
For federal income tax purposes, the federal government has changed the tax laws regarding spousal support. For all divorces and legal separations executed after December 31, 2018, the person who pays spousal support cannot deduct their payments on their federal taxes and the person receiving support will not declare it as income on their federal income taxes.
“But what about California state taxes?” California’s state tax laws are not the same as the federal tax laws. Unless California changes its tax laws, spousal support will continue to be tax-deductible for the paying spouse and the person who receives it will continue to count it as income, even after December 31, 2018.
If you have tax questions regarding spousal support, you can contact your accountant or CPA, or you can contact our firm to request a free case evaluation with an Orange County divorce attorney. We’d be happy to answer your spousal support questions and help steer you in the right direction.
Contact Burch, Coulston & Shepard, LLP today at (949) 565-4158.