Kevin Qualls Family Law
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Current and future tax consequences of alimony

As it stands right now, an Orange County, California, resident who pays alimony is able to take those payments as a tax deduction, while the spouse who receives the alimony, and who usually makes less money, will have to include those payments as income.

Currently, there are certain restrictions on this rule. For example, a former couple cannot file a joint return if one party wants to deduct alimony, nor can they be living together under the same roof. Moreover, if a person's legal separation agreement or divorce decree says that the payments are for some purpose other than alimony, then they will not be tax deductible. It also has to be clear that the payments are not child support payments, as child support is not tax deductible.

Finally, the payments have to be "cash" payments, meaning for tax purposes, alimony cannot include things like periodic transfers of stock or some other benefit that cannot go directly in to the recipient's checking account. The payments have to be what alimony is designed to be, that is, a regular stream of income that ends no later than upon the death of the person receiving it.

Perhaps most importantly, under the recently enacted tax reform legislation, all alimony orders entered after 2018 will carry with them no tax deduction whatsoever. Instead, the person receiving the alimony will not have to report it on his or her taxes as income. Effectively, the measure charts out a complete change of course when it comes to alimony.

For now, at least, alimony is tax deductible, although there are certain restrictions one needs to be aware of before attempting to claim that deduction.

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Kevin Qualls Family Law
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