A new set of tax laws passed by Congress will have a major impact on couples who enter spousal support agreements or orders in 2019. Experts say that most people should consider finalizing spousal support this year to avoid the tax consequences promulgated in the new law. Spousal support is sometimes referred to as alimony.
The new law, the Tax Cuts and Jobs Act, provides that the paying spouse will no longer be allowed to deduct spousal support payments. In addition, the payee spouse will no longer be required to report and pay taxes on alimony payments.
This law will apply to any spousal support orders made final in 2019. Thus, if you have been paying or receiving alimony before the effective date, the new tax law will not apply to you.
Payor spouses typically benefit from being able to deduct alimony payments, and as a result are more willing to agree to higher alimony payments. In addition, California courts will consider the tax implications of spousal support when setting an equitable amount. Thus, the new law is expected to negatively impact both the payor and the payee spouse.
The new law does have some advantage to the spouse receiving alimony in that the payee spouse will not have to pay taxes, however, the amount may be lower than they would have previously been awarded.
The new federal law does not change California law on when spousal support will be awarded. California courts typically award spousal support based on certain enumerated considerations, including:
The extent to which the earning capacity of each party is sufficient to maintain the standard of living established during the marriage;The ability of the party to pay;The duration of the marriage;A history of domestic violence between the parties;The age and health of the parties; andAny factors that the court determines are just and equitable.
Call a San Jose, CA Spousal Support Attorney
If you believe that this new law could impact your case, you should seek the opinion of a family law attorney quickly. There may still be time to come to an agreement and avoid the negative consequences that the new law will have on divorcing parties. At Dominion Law Group, LLP, we stay up to date on all new laws at the state and federal level that could affect your divorce or finances. With careful planning, there is no reason that these changes should catch you off guard. Our firm offers free consultations for divorcing parties. Call 408-288-5592 to speak to a skilled San Jose spousal support lawyer.