Currently, the existing Tax Code provides that spousal support, that is the support paid to one spouse (“payee”) by the other spouse (“payor”), is taxable to the spouse receiving support and deductible for the spouse paying the support. This is different than child support, which is neither deductible nor taxable. The deductible tax benefit generally resulted in the payor paying a slightly higher support amount to the payee spouse. This is now changing. The questions that remain are when and how will this impact spousal support.
According to the new Tax Code, starting in 2019, spousal support will no longer be deductible to the payor spouse nor taxable to the payee spouse. Does this mean that support orders that have been in effect prior to the start of 2019 will be impaired by the new Tax Code? The current understanding is no, if the support is part of a permanent final Judgment on or before December 31, 2018. That means, so long as you have a final Judgment in place prior to December 31, 2018, support will remain deductible to the payor and taxable to the payee.
What if you don’t have a Court-signed Judgment before December 31, 2018? If you don’t have a Judgment signed before December 31, 2018, spousal support, as it stands, will no longer be deductible or taxable.
This change in the Tax Code will have a significant impact on future spousal support for those who do not have a final Judgment before December 31, 2018. Besides the loss of the tax deduction to the payor, the amount of spousal support will likely be less. This is because the calculation for spousal support will be based upon, amongst other things, the payor’s net income as opposed to adjusted gross income.
At present, we do not know specifically how much this will reduce spousal support; all we know is that it will. If you are presently going through a divorce or considering it, it is important to try and reach a Judgment, if not on everything, at least on spousal support. Just because you sign a Judgment before December 31, 2018, does not make it final. It has to be signed by the Court. It is anticipated that there will be a rush at the end of this year to have Judgments signed by the Court and as a result, the Courts will be processing significantly more Judgments than normal. Have your Judgments submitted to the Court at least three months before the end of the year for processing, otherwise you run the risk that it will not be signed, which will impact support and particularly the amount of support.
For more information and to schedule your free consultation, please call the Law Offices of Steven B. Chroman, P.C., at 661-255-1800 or visit www.chromanlaw.com. Mr. Chroman is a Trusted Advisor Award Winner and named Top 100 California Attorney with over 20 years of experience and local service. You can purchase Mr. Chroman’s best-selling Divorce Workbook at www.amazon.com/Preparing-Divorce.
This article was originally published in Santa Clarita Magazine as part of our firm’s mission to make family law information more accessible to the Santa Clarita community. Read the full feature and others at santaclaritamagazine.com.