Is Alimony (Spousal Support) Tax Deductible in California?

• What is alimony, or spousal support?
• Are alimony payments tax deductible in California?
• What criteria must be met for the payer to legally claim deductions for alimony?
• References

California and the federal government have different tax laws regarding spousal support. For a long time, alimony payments were considered tax deductible in California, assuming certain requirements were met. 

However, federal law increasingly overrides these rules due to the Tax Cuts and Jobs Act of 2017 going into effect. This makes divorce or separation agreements, as well as similar separation instruments, not tax deductible if entered into after December 31, 2018. 

What is alimony, or spousal support?

Alimony, officially known as spousal support in California, is a form of court-ordered payment meant to help a party pay their monthly expenses after a divorce legal separation, or in the event of a domestic violence restraining order case. 

Technically, domestic partner support is the term used when one is making such payments to a former domestic partner, whereas spousal support references payments to a former spouse. In California, however, the term spousal support is often used to encompass both situations.

Duration of spousal support

Spousal support is not guaranteed in a California divorce. However, when it is awarded in marriages that lasted under 10 years, judges tend not to award it for a duration longer than half the marriage. If the couple was married for more than 10 years, there is no law-defined limit. It is up to the judge’s discretion.

Purpose of alimony

In theory, these court-ordered payments are intended to give a person who may have served a supporting role in a marriage, rather than a “breadwinner” role, time to become self-supporting. One of the main goals a judge has when deciding if spousal support is appropriate is determining how much time a person is likely to need to become self-supporting and how much money they will need in the interim. 

Obligatory payments

If spousal support is ordered by a judge, these payments aren’t optional. However, there are avenues a person can take if making a court-ordered payment isn’t feasible. 

As a general rule, you should always pay at least as much of a payment as you can and immediately address your inability to pay. This can help reduce your risk of serious legal issues.

Are alimony payments tax deductible in California?

The Tax Cuts and Jobs Act of 2017 (TCJA) impacted people’s ability to deduct alimony payments from their taxes. As of January 1, 2019, the TCJA caused rules to go into effect that eliminates the ability to deduct alimony payments from your taxes. 

Exceptions existed for periods before the rules went into effect. According to the American Bar Association, the rules currently in effect make it such that, on a federal level, there is no deduction for alimony in a divorce that is finalized after the 31st of December, 2018.

Spousal support payments that were received used to count as income at a federal level. They no longer do if your first spousal support order or judgment was completed on or after January 1, 2019.

Note that the situation is complicated by California and the federal government having different tax laws regarding spousal support. In California, spousal support payments can be deducted from state income taxes, and a person who receives support must report the payments as income.

What criteria must be met for the payer to legally claim deductions for alimony?

Assuming the divorce or separation in question was entered before the cutoff, five criteria are generally used to determine whether a payer can lawfully claim deductions for alimony paid:

1. The payments must be made in cash, check, or money order

Spousal support must be paid via cash, money order, or check to meet the criteria to deduct these payments from your taxes. This is fairly standard. You cannot, for example, buy gifts, give them to another party, and claim the cost of that gift was paid in alimony, even if that gift has obvious transferable value (like a gift card). 

2. The payments must be mandated under a written divorce or separation agreement 

To qualify as spousal support, payments must be required as part of a written separation or divorce agreement. This means you cannot deduct payments made of your own accord or due to any kind of legal agreement distinct from a divorce or separate maintenance decree or written separation agreement, even if those payments are ostensibly intended to help the party you are separated from in a way similar to the way alimony payments are intended to help.

3. The payer and recipient cannot be members of the same household at the time any payments are made

For payments to be considered alimony or spousal support, the parties need to be truly separated. This doesn’t just mean they are legally divorced or separated. They must live in different households. 

This rule largely exists so a person cannot deduct payments that might theoretically be continuing to give them direct benefit. For example, paying an ex-spouse “spousal support” and then having them use that money to help you pay your rent is not legal.

4. The payer has no obligation to pay after the death of their former spouse 

One of the less intuitive and arguably obscure requirements for support payments to be considered alimony is that the payer must not be liable for payment after the death of the recipient. If a person is making typical spousal support payments, this is unlikely to be an issue. 

5. The payment is not treated as child support or another form of payment

This criterion is fairly straightforward. Child support payments cannot also be treated as spousal support payments. If a person is court-ordered to pay child support and spousal support, they must pay each separately. More broadly, if a divorce or separation agreement states a given payment is for something other than spousal support, it cannot be treated as alimony for tax purposes. 

Suggested:

• Guide to Spousal Support in California
• Remarriage and Child Support in California

References