As a general rule and unless otherwise designated, spousal support (also known as alimony) is taxable to the recipient and deductible by the payor. On the contrary, child support is not taxable to anyone and is not deductible. Unlike other personal deductions, the deduction for spousal support is are an “adjustment to income” for both California and federal income tax purposes. This means the payments reduce gross income in calculating adjusted gross income and may generally be deducted even though the taxpayer does not itemize deductions. Since the party who pays spousal support is usually in a much higher tax bracket than the recipient, such payments may generate significant tax savings.
The following are important factors to keep in mind in regards to the deductibility of spousal support payments: (1) The payments must be in cash and must be received by or on behalf of the supported spouse. (2) The cash payment must be received under a divorce or separation instrument. (3) All of part of spousal support payments may be nontaxable or nondeductible simply by designating them as such in the divorce or separation instrument. (4) The payor’s obligation to pay spousal support must cease upon the death of the supported spouse. (5) Spousal support payments are not deductible if the payor and payee file a joint tax return together for the taxable year in question. (6) The payee must provide the payor with his/her social security number and the payor must disclose this information on his/her tax return. (7) Upon a final judgment of divorce or separation, payments are not deductible if the separated/divorced spouses are living in the same dwelling.
If you have any additional questions about spousal support or any other family law issue, please contact Sagaria Law. Our team of family law attorneys can answer any family law questions you may have and assist you through the process. We represent clients from Santa Clara County, Alameda County, Monterey County, San Mateo County, and surrounding areas. Contact our office today to schedule your free consultation to speak with one of our attorneys.