How Recent Tax Reforms Will Affect Spousal Support

The Tax Cuts and Jobs Act

Starting January 1, 2019, the provisions of the Tax Cuts and Jobs Act will come into effect. Among the various tax reforms provided by this recent legislative act are dramatic changes to how spousal support payments – also known as alimony – are treated for federal income tax purposes. Under the new tax laws, spousal support payments are no longer deductible for the payor spouse. As a result, those who are obligated to pay spousal support must pay federal income taxes on such amounts. This marks a major departure from what was known as the alimony tax deduction.

The New Tax Implications on Spousal Support

Under the former tax regime, taxpayers were allowed to deduct spousal support payments from their adjusted gross income for federal tax purposes. Taxpayers who received spousal support were required to report alimony payments as income. This arrangement was in line with the notion that persons paying spousal support acted as an intermediary through which the supported spouse received income to which they were entitled. Because the payor spouse could not benefit from the funds they paid to their former spouse, they were not responsible for paying taxes on those funds. Since the spouse receiving alimony directly benefited from payments, they were responsible for paying income tax on their spousal support receipts.

However, the Tax Cuts and Jobs Act effectively reverses this arrangement, putting the onus of paying income taxes for spousal support on the payor spouse. The rationale behind this reform was to eliminate a growing discrepancy between what the payor spouse reported as a deduction and what the supported spouse reported as income. Additionally, it eliminated what many thought was a “divorce subsidy” that incentivized people to file for divorce.

Fortunately, the new tax treatment for alimony payments only impacts spousal support orders that are issued after January 1, 2019. This includes initial spousal support orders from a recent divorce, as well as spousal support modifications that are put into effect this year. As a result, spousal support modifications issued this year regarding orders initiated before January 1 will be treated according to the new rules established by the Tax Cuts and Jobs Act.

Consult an Experienced Spousal Support Attorney for Legal Advice

At the Law Offices of Jeffrey S. Graff, we take care to stay up to date regarding recent legislative changes that may affect your rights and obligations regarding spousal support. Under the direction of Attorney Jeffrey S. Graff, our legal team will carefully advise you about the legal implications of recent legislative developments such as the Tax Cuts and Jobs Act. We are committed to making sure you have a sufficient understanding of crucial legal matters so you can reach an informed decision about your rights and options for matters of spousal support.

For comprehensive legal advice about spousal support in California, contact the Law Offices of Jeffrey S. Graff at (805) 633-4999 to consult with our experienced attorney today.

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