As the holidays fade into memories, that most sobering time of the New Year takes center stage – tax filings. For divorced couples, one of the biggest changes made legal in 2019 was the handling of spousal support.
Spousal support is an allowance paid from the higher-earning spouse to the lower-earning spouse during a legal separation or divorce. The amount and duration of the payments depend on a variety of factors, including the length of the marriage, the age of the spouses, degrees earned and other factors that a family law attorney can outline.
Previously, spousal support in Los Angeles and all counties of California was tax deductible for the spouse who paid and was listed as taxable income for the spouse who received support. But due to the passage of the Tax Cuts and Jobs Act (TCJA) – which scrapped a 75-year old spousal support payment tax stipulation – taxation of spousal support for couples who divorced in 2019 (and going forward) will no longer be tax deductible, and the recipient will no longer owe any taxes on the payments.
On the surface, it would seem to be a major monetary victory for the spousal support recipient who now receives their spousal support payments tax free and a financial loss for the paying spouse by losing what in the past might have been a substantial deduction. But a closer look shows that this new law might change the way the best divorce lawyers will handle negotiations.
How the New Tax Law Might Affect a Divorce Lawyer’s Case
The spousal support tax deduction was perceived as a strong bargaining tool in divorce proceedings before the new TCJA, but the previous advantage has now fallen by the wayside.
The change of the law relating to taxation and spousal support means divorce negotiations will most likely become trickier, especially for wealthy couples who often benefited the most from the tax deductions pertaining to spousal support. Smaller spousal support payments may become the new trend in this environment since the tax advantages with a larger sum are now lost.
Some have questioned if they are able to pay more in child support to offset any of the changes under the new spousal support law. The answer is no. Spousal support continues to not be treated as child support. Child support is never deductible and is not counted as taxable income by the person receiving it.
Learn How Your Spousal Support in Los Angeles May or May Not be Affected
It’s important to consult with a seasoned California Family Law attorney such as Leon Bennett to determine whether this new change in spousal support taxation affects your particular situation. Consider that the old-law treatment for spousal support payments under pre-2019 divorce agreements will remain intact.
The new TCJA stipulations are specifically tied to payments required under divorce or separation instructions executed after December 31, 2018. If you signed an agreement of separation or divorce before the end of 2018, and the support order is modified after the start of 2019, the pre-2019 tax rules still remain in effect. The only exception to this rule would be if there is a specific clause in the agreement that says otherwise.
Consult with a Los Angeles divorce attorney to navigate the tricky waters of your divorce as it relates to the new taxable guidelines of spousal support. You will want to have a lawyer review the separation or divorce agreement to assure that you are adhering to and taking best advantage of the new laws, especially if your divorce date was on or after January 1, 2019.
About the Leon F. Bennett Family Law Firm
With over 35 years of experience as a divorce attorney in Woodland Hills, the Family Law Firm Leon F. Bennett and his seasoned legal team have helped families reach mutually agreeable decisions regarding matters of divorce, custody, support, and the many rights and agreements associated with family law services. We offer a free first-time consultation to qualified candidates.
We handle cases of Divorce Litigation and Spousal Support in Southern California and the Los Angeles, Santa Barbara, Riverside and Orange County areas. We represent clients in communities such as Woodland Hills, Calabasas, Agoura Hills, Oak Park, Westlake Village, Malibu, Thousand Oaks, Newbury Park, Camarillo, Moorpark, Oxnard, Pacific Palisades, Ventura County, Simi Valley, Santa Clarita, Valencia, Northridge, Tarzana, Sherman Oaks, Studio City, Santa Monica and Beverly Hills. Contact us today to help find a suitable family law solution with compassion and closure.