(0:00 – 0:53)
Hi everyone, I’m Dr. Michael Mantell, joining Bonnie Rabinovitch-Mantel for another Family Law Matters. Bonnie is the owner and managing partner of the Primus Family Law Group. Hi, Bonnie.

Hi, Michael. You doing okay today? Doing great. Thanks so much for asking.

How about you? I haven’t murdered anyone this week, so it’s been a good week. Well, I think we should start again. I’m kidding.

Bonnie, there are people who do feel like pulling their hair out and screaming when it comes to the issue of taxes in family law matters. It’s a little bit beyond my scope of understanding, but you’re the expert here. Tell us a little bit about what we need to know when it comes to taxes in family law.

(0:53 – 2:08)
Sure. I think you remember we’ve talked about the fact that spousal support, when it was paid, used to be deductible to the payor and includable as income to the payee. A few years ago, that changed.

Now, whoever is getting child support and possibly spousal support is getting it tax-free, which means they’re getting non-taxable income that is a boom to them, whereas the person who’s paying it no longer gets to deduct any of that from their taxes, so they’re paying net dollars. It does have a larger tax implication for the payor who has to pay their taxes and then pay support based on the net dollars. That has been an interesting change.

Even if you had a prior order that was allowing it to be tax deductible, if you modify it, new rules apply. It won’t be the same amount because they will account for the taxes that you are saving. Not going into the politics of this, what led to this shift in policy? This is a state law.

(2:08 – 2:53)
Actually, your spousal support is taxable statewide. It’s just not taxable federally. Why did they change that? Because they felt that the recipient of support needs the support and therefore they should be exempt from being taxed on it.

It was trying to help the recipient get back on their feet. How does this impact people when they’re working with you and trying to figure out spousal support and how much they want to pay? Does it impact, I want to pay less now? Well, it will impact it in the sense that the support is calculated based on gross dollars. So we’re paying based on the artificial gross dollars because we don’t live on gross.

(2:53 – 3:14)
But once the number is determined, you’re really paying it from net dollars. So sometimes what happens is the payor is left with not enough for themselves because they’re paying it out over here and they get no relief tax-wise. And we don’t see that changing anytime in the future.

(3:15 – 4:32)
And it’s not a lot that you can do that, I guess. No. What we do support, as you know, is based on a formula.

So there’s nothing really we can do there. But spousal support is always up for negotiation. It’s not based on a formula, at least not at the end of a case.

And so when we’re at the end of a case and we’re talking about spousal support after the divorce, there is room for negotiation with respect to, hey, maybe I should be paying a little bit less because it’s net dollars now, not includable, not deductible. And so if people want to talk to you about this, and this is pretty complicated and can raise people’s emotions quite strongly, how can they reach you to get a free 30-minute consultation on this? Now they can reach us directly at 619-574-8000. And you will be put on my calendar for that free 30-minute phone or Zoom conversation.

Or you can reach us online at www.primusfamilylaw.com. And there’s a form you can fill out. There’s also a live chat person you can speak to who will gather your information and then bring it to us so we can set that consult.