Who Pays Taxes On Spousal Support?

Spousal support in California is ordered by the court, and it is a payment made by one spouse to the other spouse in connection with a divorce or separation, or in situations involving a domestic violence restraining order. California also recognizes domestic partner support in circumstances where domestic partners separate and end their relationships. In those cases, rather than describing the support as spousal support, the court can refer to the support as domestic support. In either case, spousal support is intended to help the receiving spouse pay monthly bills. Support can be temporary or long-term, with temporary support awarded while a case is pending and long-term support ordered after a divorce is finalized.

Courts do not award spousal support or domestic support in every case. Rather, courts will award support after one of the spouses or domestic partners requests it, and after the court considers a wide variety of factors designed to determine whether support is appropriate in that particular case. When spousal support or domestic spouse is awarded, who pays taxes on it? Further, can taxes on spousal support have any impact on the case itself?

Payer Spouse is Responsible for Taxes on Spousal Support 

The spouse (or domestic partner) who pays support is responsible for paying federal taxes on the amount that goes to the recipient. It is important to know that this is a relatively recent change to the law. Under the Tax Cuts & Jobs Act of 2017 (TCJA), changes were made to the way in which support or alimony are taxed. Prior to the passage of that law, alimony and support was deductible from the income of the spouse making the payments, and support needed to be included in the income of the spouse receiving the payments. However, the tax consequences were flipped beginning in January 2019.

As the Internal Revenue Service (IRS) explains in a clarification notice, as a result of the TCJA, “beginning Jan. 1, 2019, alimony or separate maintenance payments are not deductible from the income of the payer spouse, or includable in the income of the receiving spouse, if made under a divorce or separation agreement executed after Dec. 31, 2018.” To be clear, after the changes to the law were implemented, any new support ordered in a divorce or separation requires that the spouse paying support also pays federal taxes on that amount. Note though that the state of California still considers spousal support as taxable income to the recipient spouse.

California Courts Can Consider the Tax Consequences in Awarding Support 

You should also know that, when it comes to spousal support and taxes, California law allows courts to consider the tax consequences to each of the parties when determining a spousal support award.

Seek Advice from a San Jose Spousal Support Lawyer 

If you have questions about spousal support or domestic support, and specifically if you have questions or concerns about the relationship between taxes and support, you should seek advice from a family lawyer. One of the experienced San Jose spousal support attorneys at Foster Hsu can provide you with additional information. Do not hesitate to get in touch with us to learn more about the ways we can assist you with financial aspects of your divorce or separation.

Sources:

irs.gov/forms-pubs/clarification-changes-to-deduction-for-certain-alimony-payments-effective-in-2019#:~:text=Beginning%20Jan.,31%2C%202018

leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?sectionNum=4320.&lawCode=FAM