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Custody & Support Modifications

Important Tax Change to Spousal Support Is on the Horizon

The tax reform which was big news at the beginning of the year, among other things, made important changes to the way spousal support, which is sometimes referred to as alimony, will be treated for federal income tax purposes.

To review, the federal tax code currently allows those who pay spousal support to claim those payments as a deduction on their income taxes. On the flip side, a person who receives spousal support must report those payments as income on his income taxes.

For those final orders entered starting on January 1, 2019, this tax treatment will change. From that point, alimony payments will have no tax consequences one way or the other. In this sense, they will be more like child support payments. A person who pays spousal support will not be entitled to a deduction, and a person receiving the support will not have to treat it as income.

The key to understand at this point is that finalized spousal support orders entered between now and December 31, 2018, will fall under the current rules.

This does not mean that Los Angeles residents who suspect they will be required to pay spousal support should rush to get their divorces or legal separations finalized. After all, rushing could lead to a mistake that costs far more than any tax savings a person may have realized from the current rules. In some cases, though, it may be a good idea to wrap things up quickly.

Everyone should be aware that, unless something drastic and unexpected happens, these changes to the tax treatment of spousal support will go in to effect in the upcoming weeks. Los Angeles residents how might be affected should evaluate how to respond to these changes with the help of their family law attorneys.