Couples in California who are going through a divorce may need to get ready to make changes to their budget. This is because they will be living on a single income as opposed to the combined income they were afforded while married. In some cases, an individual will be required to pay alimony to help the other spouse maintain their standard of living after the marriage ends.
The Tax Cuts and Jobs Act (TCJA) changed the way that alimony is treated for tax purposes. Starting in 2019, alimony is no longer a tax deduction to the person paying it. Therefore, couples who want the current benefits of making alimony payments need to have their divorces finalized by Dec. 31. It’s important to note that as long as the agreement is official by then, it can be modified in the future without losing the tax benefits.
Therefore, it may be best to create a deal that is acceptable for now and work to make changes at a later date. Of course, alimony payments are not the only thing to consider when negotiating a divorce settlement. Individuals could overcome a lack of alimony by negotiating for other assets in exchange. Ideally, those going through divorce will talk with a financial planner to help create a favorable divorce settlement.
Individuals who are unable to support themselves immediately after a divorce may be entitled to spousal support. This may last for a predetermined period of time or be paid on a permanent basis depending on facts in the case. Generally speaking, alimony payments end when an individual gets married or obtains significant support from another party. An attorney could review a divorce settlement before it becomes binding on all parties involved with the deal.