Spousal Support Considerations After the Tax Cuts and Jobs Act – Does California Conform?

Spousal Support Considerations After the Tax Cuts and Jobs Act – Does California Conform?

As you likely already know, after the Tax Cuts and Jobs Act (TCJA), alimony will not be deductible for the payor spouse, or reportable as income to the payee spouse, for divorce decrees entered after 2018.

But what about California, do these new rules still apply?

California does not conform to the new laws, and it will still allow a deduction for spousal support payments and require a payee spouse to report the spousal support as income.

Because California will still allow payor spouses to deduct spousal support payments, divorce decrees must still meet certain requirements.

For example, the payment must be made in cash or cash equivalent; the payment must be made incident to divorce; the parties must not have designated that the payment was not spousal support; the payment must not be treated as child support; as well as other requirements.

Most divorce lawyers are not qualified to advise you on the tax matters surrounding divorce.

If you have questions about the foregoing, or any tax matters relative to your divorce, please reach out to a lawyer at our firm who is qualified to speak to you about both family law and tax law related matters.

Mendes Weed, LLP is here to help you if you have any questions.  (925) 390-3222.

 

The tips and materials provided on this page are for informational purposes only, offered as public service. No information on this website should be considered legal advice or used as a substitute for legal advice. For legal advice, you should contact an attorney directly.

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Walnut Creek Main Office

1990 N. California BLVd.
Suite 1020
Walnut Creek, CA 94596

(925) 390-3222

San Francisco Office

95 Third Street
2nd Floor
San Francisco, CA 94103

(628) 216-5558

Oakland Office

66 Franklin Street
Suite 300
Oakland, CA 94607

(510) 822-2770

San Jose Office

3031 Tisch Way
110 Plaza West
San Jose, CA 94607

(408) 707-1667

The End of the Spousal Support Silver Lining: The New Tax Laws and What They Mean for Your Spousal Support

The End of the Spousal Support Silver Lining: The New Tax Laws and What They Mean for Your Spousal Support

If you are planning to get a divorce, and you are worried about your spousal support you may want to consider racing to the courthouse.  It is likely that among friendly discussions at the neighbors’ backyard BBQ, you have swapped stories about someone who is paying spousal support and deducting it at the end of the year; however, Trump’s new tax plan will drastically transform the divorce process and the concept of spousal support.

California divorce cases are primarily governed by the California Family Code; however, there are some occasions where federal law applies. Under current federal law, your divorce counsel can construct a Stipulated Judgment or Marital Settlement Agreement which can benefit both parties.  The agreement can be drafted to allow the payee spouse to receive higher support payments, while affording a lower post-tax cost to the payor spouse.  It is somewhat of a win-win.

Spousal support is a heavily weighted, and abundantly negotiated issue in divorce cases, and the taxability issue is a major factor in such negotiations. The new plan arguably creates a lose-lose.  Under the new tax plan, Spousal Support Orders entered into after December 31, 2018 will no longer be tax deductible for the payor.  The payor spouse no longer receives a tax deduction, and the payee receives less money.  Feel free to make your “impact to the economy” arguments here.

If you are contemplating a dissolution, regardless of which side of the spousal support issue you fall on, you may want to hustle, as a delay could seriously impact your bottom line.  It is also important to note that the court system is not as quick as those you may have seen on shows like The Good Wife or Law and Order.  It can often take months to get a court hearing, depending on how impacted your county is.

Plan accordingly, and contact Mendes Weed, LLP for the help you need.

 

The tips and materials provided on this page are for informational purposes only, offered as public service. No information on this website should be considered legal advice or used as a substitute for legal advice. For legal advice, you should contact an attorney directly.

SuperLawyers-RisingStars
Best of the East Bay Attorneys
Lisa Janine MendesReviewsout of 5 reviews
Walnut Creek Chanber of Commerce logo
Christina Weed - Taxation Law Specialist
lawyers of distinction badge 2020

Walnut Creek Main Office

1990 N. California BLVd.
Suite 1020
Walnut Creek, CA 94596

(925) 390-3222

San Francisco Office

95 Third Street
2nd Floor
San Francisco, CA 94103

(628) 216-5558

Oakland Office

66 Franklin Street
Suite 300
Oakland, CA 94607

(510) 822-2770

San Jose Office

3031 Tisch Way
110 Plaza West
San Jose, CA 94607

(408) 707-1667