Taxes & Post-Divorce
Support payments after divorce aren’t just about how much—they’re about how they’re taxed. For couples in California with significant income disparity, understanding the tax treatment of spousal and child support is critical. With federal rules changed under the Tax Cuts and Jobs Act—and confirmed under the OBBBA—getting support wrong could cost more than you expect. Strategic planning can help both parties minimize their tax burden and structure smarter settlements.
Taxes & Post-Divorce
Support payments after divorce aren’t just about how much—they’re about how they’re taxed. For couples in California with significant income disparity, understanding the tax treatment of spousal and child support is critical. With federal rules changed under the Tax Cuts and Jobs Act—and confirmed under the OBBBA—getting support wrong could cost more than you expect. Strategic planning can help both parties minimize their tax burden and structure smarter settlements.
Support shouldn’t come with surprise tax bills. From tax planning to strategic settlements, we make sure what you give (or get) is smarter and more sustainable.
When a couple with a significant disparity in income divorces in California, the lower-earning spouse is often entitled to spousal support, based on a complex set of factors used to determine the amount and length of such support. If that couple also has children together, the higher-earning spouse is likely to be required to pay child support to meet their financial obligations for raising them until the children graduate high school or turn age 19 (whichever comes first). While the first thought when negotiating this type of ongoing support obligation is understandably on the amount to be paid, overlooking the tax consequences of spousal and child support can result in a more significant financial impact than anticipated.
IRS rules on spousal support changed in 2019, due to the passage of the Tax Cuts and Jobs Act (TCJA), which has led to confusion in the years since as to the deductibility of support payments. The newly enacted One Big Beautiful Bill Act (OBBBA) left the existing federal spousal rules untouched, maintaining the tax treatment established under the Tax Cuts and Jobs Act. Understanding federal spousal support tax laws in 2025, as well as how they differ from California law, is essential for accurately anticipating how spousal support will affect each party’s tax burden. In certain circumstances, negotiating a divorce settlement that allocates tax deductions and credits strategically, or that reduces ongoing support payments in favor of a more generous property settlement, can have benefits for both parties.
Are Spousal Support or Child Support Payments Tax-Deductible?
For divorces completed as of January 1, 2019, when the applicable provision of the TCJA took effect, spousal support is not deductible for the payor on federal income taxes, and it does not need to be reported on the recipient’s income tax filing. For support orders or judgments completed prior to the end of 2018, spousal support can be deducted from the paying spouse’s federal taxes, and the recipient spouse is required to report and pay taxes on the amount they received. (The situation can be more complex for orders completed prior to 2019 but modified since; the previous rules apply unless the modified order specifically changes the tax treatment of the payments.)
For higher-earning spouses, the previous federal treatment was considered a possible incentive for agreeing to higher ongoing alimony payments, as the deductibility of those payments could reduce their income tax. The current treatment favors the lower-earning spouse, who no longer has to include spousal support in their earnings, which might bump them into a higher tax bracket.
Child support has never been deductible for the parent paying it at either the federal or state level, and it is not taxable income for the parent who receives it. Child support has been treated as a personal expense instead of income at both federal and state levels.
Federal vs. State Treatment of Spousal Support in California
The picture becomes slightly more complex when state taxes are factored in, because in California, the situation is reversed—spousal support is deductible from state income for the paying spouse, and must be reported as income by the recipient spouse. Spousal support that is paid under the terms of a pre-2019 agreement will already be factored into the federal adjusted gross income. Ex-spouses paying or receiving spousal support under a later agreement will need to include the relevant amounts on Schedule CA (540) to ensure that it is properly reported. Spousal support (Alimony) is an above-the-line deduction in California, meaning that it is deducted from the California adjusted gross income even if the filer does not otherwise itemize their deductions.
The differing tax treatment of spousal support and child support at the state level also makes it imperative to accurately track and document which payments are made for which purpose. Failing to classify each properly for tax purposes could result in filing errors, with the potential loss of state tax savings for the payor of spousal support or penalties for failing to pay tax owed for the recipient.
Considerations for Mitigating Tax Burden When Negotiating Spousal or Child Support
For individuals in high tax brackets, paying spousal and child support with after-tax dollars can impose a relatively steep ongoing tax burden. At a minimum, the paying spouse should negotiate payment amounts keeping that tax obligation in mind to calculate the actual impact on their bottom line. However, certain strategies can enable them to potentially negotiate for a lower payment while providing the required financial support.
One such issue is which parent is eligible to claim their child or children as a dependent on their taxes, as only one can do so. Generally, per IRS rules, the parent who has physical custody the majority of the year would claim them, and that person can also claim the Child Tax Credit for children under 17 if eligible; if custody is split 50-50, the parent with the higher adjusted gross income would be considered the custodial parent. The credit starts phasing out at incomes of $200,000 for 2025, however, so those with higher incomes may not benefit at all. It can be more financially beneficial to have the lower-earning spouse claim the children as dependents (which can be done via Form 8332 if necessary), enabling them to claim the largest possible share of the Child Tax Credit, and adjust the child support payments so the higher-earning spouse is paying proportionately less child support out of pocket.
Another potential strategy to reduce the ongoing tax impact of spousal support is to negotiate a higher property settlement or a lump-sum payment in exchange for reducing or eliminating ongoing alimony. Federal law stipulates a number of requirements that mark payments made to a former spouse as alimony or separate maintenance, but not all payments qualify as such. For example, a noncash property settlement is not considered alimony, and as long as such a transfer is made incident to divorce, no gain or loss is recognized and no tax is due. Anybody exploring this route should work closely with qualified financial, tax, and legal professionals to ensure that the proposed strategy will not only meet court approval but is also aligned with their post-divorce financial planning goals and correctly executed to meet their tax objectives.
Experienced Legal Representation for Spousal and Child Support in Silicon Valley
The financial impact of paying spousal and child support can go well beyond the amounts that change hands if the potential tax liability is not accounted for as you negotiate a divorce settlement. The expert family law attorneys at Hoover Krepelka are here to advocate for your rights and protect your long-term financial interests as you move into your post-divorce life. To schedule your consultation, fill out the form below today.
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FAQS
Do you have to pay taxes on spousal support?
If your divorce was finalized on or after January 1, 2019, you don’t pay taxes on spousal support you receive—and the person paying it can’t deduct it.
Is child support tax-deductible in California?
No, child support is not tax-deductible for the paying parent and is not considered taxable income for the receiving parent, under both federal and California law.
How do spousal support payments affect your taxes after divorce?
For divorces finalized in 2019 or later, spousal support has no impact on federal taxes. It’s not deductible for the payer or taxable for the recipient.
