Paying taxes on alimony can be confusing. Here’s what you need to know about spousal support and taxes regarding deducting alimony.
Alimony is a complex discussion topic for partners, often requiring judicial intervention. Alimony gives both partners a balanced financial footing after finalizing a divorce. With the passing of the Tax Cut and Jobs Act (TCJA) in 2017, alimony is not tax-deductible. However, California’s state tax law continues to allow the “supporting spouse” to deduct alimony from their taxes under certain conditions.
What is Alimony?
Alimony is when the court orders a “supporting spouse” to give financial support to the “dependent spouse” following a divorce. The purpose of alimony is to ease the transition from a two-income household to a one-income household for the lower-earning spouse.
What Does Not Qualify as Alimony in California?
In California, payments that are not considered alimony are:
- Property settlement payments
- Retirement benefits
- Child support payments
- Voluntary payments
Related: Alimony vs. Spousal Support in California: The Difference
How is Spousal Support Determined in California?
The judge must consider the following factors before determining the amount of alimony a spouse is entitled to:
- Earning capacity and each partner’s income/how it affects their standard of living
- Length of marriage
- Age and overall health of each partner
- Any documented evidence of domestic violence
Related: How to Calculate Spousal Support/Alimony in California
How to Report Spousal Support in California
If you are the “dependent spouse” who receives alimony payments, report the payment as income on the California return. If you are the “supporting spouse” who pays alimony, deduct it from your income on the California return.
Understanding Tax Implications of Alimony in California
The Tax Cuts and Jobs Act of 2017, which took effect in 2018, created significant changes in whether alimony is tax-deductible. The federal tax law states the partner paying spousal support in California can no longer deduct the payments from their taxes.
Requirements to Qualify for Alimony to be Tax Deductible:
- Spousal support is offered in cash, check, or money order
- Paper documents governing the divorce designate the payment as alimony
- Both partners live apart from each other when making the payment
- Spousal support payment is not a child support payment or part of the property settlement
- Specification the payments conclude at the death of one spouse
- Both partners do not file a joint tax return
FAQs about Spousal Support and Taxes: Deducting Alimony in California
Does the receiving party have to pay taxes on alimony?
Yes, the California Tax code considers any spousal support payments as income, meaning alimony cannot be tax-deductible.
How long does spousal support in California last?
Spousal support depends on the length of the marriage. If the marriage lasted less than ten years, payments would continue for half the length of the marriage. No limit for marriages lasting longer than ten years exists until the “dependent spouse” proves that no more financial support is needed.
Related: How Long Does Alimony Last in California
If alimony is not the payment type for me, are there other alternatives?
Yes, partners may choose a one-time lump sum payment instead of monthly alimony payments, which can help save money on taxes.
What happens to my spousal support when my child support payments cease?
When a spouse pays child support payments, spousal support payments tend to decrease. However, when child support ends, the “dependent spouse” can petition the court to increase the spousal support payments.
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