Will my modified California alimony order be grandfathered into the old tax law?
My judgment of dissolution was entered in 2017, with a spousal support amount non-modifiable for 1 year. We are now modifying it in 2019. One attorney says the new 2019 judgment (which will be a buyout of the spousal support order) will be non-deductible to payor and non-taxable to recipient. Another attorney says that it WILL be deductible to the payor and taxable to the recipient because it will be grandfathered to the original divorce judgment of 2017. What is your legal opinion on this?
paul
responded
6 years ago
Hi @llsheppard
I am not exactly sure what you mean when you say your modification will be a "buyout" of your prior California alimony award. But, if you want to provide more details, I'll be happy to try and answer your specific question. Generally speaking, however, California alimony awards must be analyzed at both the federal and state levels for income tax purposes.
Federal Income Tax Treatment
In regards to the modification of a California alimony award, the general rule is that if your divorce judgment was finalized by a California court prior to January 1, 2019, then alimony payments made pursuant to a modification order will continue to be deductible by the payor spouse and included as income to the recipient spouse, for federal income tax purposes. However, if the modification order expressly provides that California alimony payments will not be deductible by the payor spouse and not included as income to the recipient spouse, then they will be treated as such for federal income tax purposes.
If on the other hand, if your California divorce judgment was or is not finalized until after December 31, 2018, then California alimony payments made pursuant to the judgment will not be deductible by the payor spouse and not included as income to the recipient spouse, for federal income tax purposes. All modifications of the alimony payments will receive the same tax treatment.
California Income Tax Treatment
Regardless of when a divorce judgment was or is entered, the State of California allows alimony payments made pursuant to the judgment to be deducted by the payor spouse and included as income to the recipient spouse, for California income tax purposes. The same is true for any modification of the alimony award contained in the divorce judgment.
The above discussion outlines the general rules regarding tax treatment of alimony payments in the State of California. Please keep in mind there are additional requirements that must be met for your alimony payments to qualify as deductible to the payor spouse and included as income to the recipient spouse. Keep the discussion going if you have any additional questions!
I am not exactly sure what you mean when you say your modification will be a "buyout" of your prior California alimony award. But, if you want to provide more details, I'll be happy to try and answer your specific question. Generally speaking, however, California alimony awards must be analyzed at both the federal and state levels for income tax purposes.
Federal Income Tax Treatment
In regards to the modification of a California alimony award, the general rule is that if your divorce judgment was finalized by a California court prior to January 1, 2019, then alimony payments made pursuant to a modification order will continue to be deductible by the payor spouse and included as income to the recipient spouse, for federal income tax purposes. However, if the modification order expressly provides that California alimony payments will not be deductible by the payor spouse and not included as income to the recipient spouse, then they will be treated as such for federal income tax purposes.
If on the other hand, if your California divorce judgment was or is not finalized until after December 31, 2018, then California alimony payments made pursuant to the judgment will not be deductible by the payor spouse and not included as income to the recipient spouse, for federal income tax purposes. All modifications of the alimony payments will receive the same tax treatment.
California Income Tax Treatment
Regardless of when a divorce judgment was or is entered, the State of California allows alimony payments made pursuant to the judgment to be deducted by the payor spouse and included as income to the recipient spouse, for California income tax purposes. The same is true for any modification of the alimony award contained in the divorce judgment.
The above discussion outlines the general rules regarding tax treatment of alimony payments in the State of California. Please keep in mind there are additional requirements that must be met for your alimony payments to qualify as deductible to the payor spouse and included as income to the recipient spouse. Keep the discussion going if you have any additional questions!
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