Spousal Support and the New Federal Tax Laws

In 2017, the United States Congress and the President signed a new federal tax code into law. It was the most comprehensive tax reform in over 30 years – not since the presidency of Ronald Reagan. The new codes went into effect on January 1, 2019.

Under the new tax codes, spousal support is no longer deductible for the payor and no longer taxable for the payee (receiver of the support). This creates numerous problems for determining the amount of spousal support an individual will receive.

Under California’s Family Code Section 4320 (j), when determining spousal support, the court must (among other items) take into account “…the immediate and specific tax consequences to each party…” To make things easier for both parties, their attorneys, and the courts, a computer program was invented to help determine the amount of spousal support based on section 4320. The program is known as a dissomaster. And, yes, it has been updated for the 2019 tax codes. (Yes, there’s an app for that.)

Another spousal support issue is the modification of support based on the old tax laws and how they affect the new tax laws. Apparently, modifications after 2019 will not affect divorce decrees entered before 2019, unless the parties agree that the new laws are going to apply. Thus, a payor who got divorced before 2019, deducting spousal support based on the old laws, will not win an argument for a new order lowering or eliminating spousal support on the basis of taxes. Because, for him/her, spousal support has always been tax deductible and always will be. (However, keep in mind, there may be other reasons unrelated to taxes to ask a court to lower spousal support.)

Regarding the receiver of spousal support (the payee) from a decree prior to 2019, he/she also cannot argue for an increase based on the new tax law, because he/she will always pay taxes on spousal support received. (Again, there may be other reasons for an increase in spousal support to argue in court.)

There are many factors and circumstances under Family Code Section 4320 that courts must consider when awarding – or not awarding - spousal support. To review these factors and circumstances visit the California Legislative Information Section online at https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?sectionNum=4320.&lawCode=FAM

After reviewing the information, and before going forward with your own case, consult with a legal expert in California’s family law to ensure your best cause of action.

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