Are Spousal Support Payments Taxable or Tax Deductible?
If you are paying or receiving spousal support, understanding how tax laws affect these payments is crucial. The Tax Cuts & Jobs Act (TCJA), enacted under the first Trump administration, eliminated the federal tax deduction for spousal support, significantly impacting both payors and recipients.
Federal Tax Treatment of Spousal Support
Under the TCJA, effective January 1, 2019, spousal support payments are not deductible by the payor on federal income tax returns. Likewise, the recipient does not have to report these payments as taxable income. Prior to 2019, payors could deduct spousal support, and recipients had to declare it as income.
California State Tax Treatment of Spousal Support
Unlike federal tax law, California still allows spousal support payments to be deducted by the payor on state income tax returns. Conversely, the recipient must report these payments as taxable income on their California tax filings.
Key Differences Between Federal and California Tax Law
Federal tax law: Spousal support payments are not deductible and not taxable income.
California state tax law: Spousal support payments are deductible by the payor and taxable income for the recipient.
Why This Matters
Understanding these tax differences can help you plan your finances effectively. If you are negotiating spousal support, knowing whether deductions apply at the state level can influence settlement discussions.
Resources for More Information
For additional information on spousal support taxation, check out these resources:
