California residents who pay alimony can deduct that support on their taxes, but several conditions must be in place first. The alimony must be named in the divorce or separation agreement, and it must be separate from child support. If the amount that is child support is not specified in the agreement, it can be identified as the amount that ends when the child reaches a certain age, finishes school, marries, leaves the home, reaches a certain income level or dies. This amount is not tax deductible.
The alimony must also end on the death of the recipient. The agreement must not specify that the amount is not alimony. The payment must be in cash or an equivalent, and it must go to the former spouse or be on the behalf of the former spouse. This means that it can be paid to a third party such as a mortgage lender. Once the divorce or separation is complete, the couple cannot live in the same home or file a Form 1040 jointly.
If the payment is not specifically defined as alimony and is not child support, it is considered part of the property settlement. This is also not tax deductible. Alimony that is front-loaded in the first two years may be taxed differently.
In many cases, spousal support is only paid for a limited amount of time. Decisions around property division might be as or more important in helping ensure a person’s financial security after divorce. California is a community property state, and this means that most assets each person acquired after marriage are considered shared property. However, a couple may negotiate a division of property that suits them better than simply a 50/50 split of all assets as well as a spousal support agreement. A judge would then review the agreement to be sure it complies with state law.