As of January 1, 2019, the tax regulations for divorce instruments are part of a new group of rules included in the 2017 Tax Cuts and Jobs Act. These amendments were made largely because of tax underreporting, which means that the tax reports of people who received alimony showed less income than the tax returns of people paying alimony. If you’re a California resident, here are some important things to know about taxes and divorce.
Alimony, dependency, and child support
For divorces and legal separations after 2018, alimony is no longer deductible by the spouse paying the alimony or included in the recipient’s income. This makes tax handling for money paid to third parties as an alimony proxy less relevant. For divorce and separation agreements before 2019, alimony is deductible to the payor spouse and can be included in income to the receiving spouse.
The 2017 act made the alimony negotiation between spouses irrelevant. From 2018 to 2025, there will be no deduction for dependency. At the start of 2026, however, the deduction will go back into effect. This means that if a taxpayer was getting a divorce in 2021 and the child are minors, divorcing spouses should address this issue to determine who will receive the dependency deduction once 2026 arrives.
Tax laws will determine who receives the exemption, and it will always be the spouse who has legal custody of the children since divorce or legal separation does not override federal tax regulations. Spouses can negotiate to decide which spouse will take the dependency exemption deduction. The noncustodial parent can take the deduction if the custodial spouse signs IRS form 8332. A copy will be provided to the noncustodial parent.