The Internal Revenue Code is, to say the least, challenging. At time it seems impossible to comply with the countless, nuanced provisions of tax law. Most people with complicated financial lives turn to the advice of experts when filing taxes to avoid running afoul of these laws.

Tax season is not the only time you should turn to professionals, though. It's important to understand the long-term tax consequences of your legal decisions before you establish binding agreements. For example, you should consult with a lawyer when establishing spousal support or alimony payments as part of a divorce settlement, to ensure that all of your interests are protected.

The IRS provides specific guidance on the taxation of spousal support. Essentially, providing that certain criteria are met, alimony payments are taxable to the receiving spouse (payments must be included in the calculation of gross income), and deductible by the paying spouse (payments can be subtracted from pre-tax gross income).

There are conditions that must be met, however. For example, in order to be considered alimony for tax purposes:

  • The payments must be made by cash, check, money order, etc.
  • The instrument of payment cannot designate the payments as not includible in gross income of the recipient or deductible by the payor
  • The spouses cannot be members of same household
  • The spouses cannot file a joint return

Spousal support is not mandated by California law, but it is regularly included in divorce decrees. Whether court-ordered or negotiated by the parties themselves, the implications of alimony payments can be huge.

Should you have any questions about the effects of spousal support on taxable income or any related issues pertaining to the support, the advice of an attorney well-versed in these topics can be invaluable.