The Effect of the New Tax Law on Spousal Support in California
Under the Federal government’s enactment of the new “Tax Cuts and Jobs Act of 2017“, the tax consequences of spousal support (or alimony) will undergo a significant change. Spousal support that was once deductible by the person paying the support and taxable to the person receiving the support will cease. Commencing January 1, 2019, spousal support will no longer be deductible by the person paying the support (payor) nor will the support be taxable to the person receiving the support (payee). This ONLY applies to Federal taxes and does not change your state tax deductions.
However, IF the parties have a permanent support agreement or order in place PRIOR to January 1, 2019, then the deductibility by payor and income to payee WILL remain in place, including any future modifications unless the modified order expressly provides that the new law will be applicable.
So when entering into any permanent spousal support agreement, especially near the end of 2018, make sure to contact a family law legal professional to make sure you get the benefit of these changes. At the Law Office of Jeffrey D. Stearman, we can assist.
However, it is best to consult a tax professional when it comes time to planning your taxes.