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Alimony is usually taxable by the recipient and deductible by the payer for federal tax purposes. It should be taxable regardless if the recipient includes the alimony on his or her tax return or even if the recipient did not have a filing obligation. If you make payments to a spouse or former spouse under a divorce or separate maintenance decree or written separation agreement, you are considered to made alimony payments for federal tax purposes. As long as the payment divorce or separate maintenance decrees or written separation agreements do not say that the payment is not alimony, the payment is alimony. If you have a liability which will continue to make payments after the death of your spouse or former spouse, then the payments are not alimony. In order for the payments to be considered alimony, they must not be treated as child support or a property settlement. Just because the payments are under a divorce or separation instrument does not mean that they are alimony. The payments called for in the agreement could be child support, noncash property settlements, payments due to community property income, payments that are for the payer’s property upkeep or for the use of the payer’s property. The payments could also be voluntary payments made by the payer and thus are considered a gifted item. |
| For California, alimony received was not included in the federal tax return because the payment was for a nonresident alien spouse must be included on the California tax return. To do so, enter the amount not included in the federal tax return because the spouse was a nonresident alien, on Schedule CA of Form 540 or Form 540NR, line 11, column C to account for it in California gross income and make sure tax is paid on this income since it is taxable for California. For the state of California, alimony received regardless of what type is taxable to the recipient and deductible by the payer. |
| Business, trade, or profession conducted partially in California |
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Any business, trade, or profession which is conducted partially in California will go through an apportionment formula. For the most part California is in conformity with federal as to what income received is taxable income. Mainly, all income received for all sources is taxable income for both Federal and California and they coincide with this rule. However, there are few differences that are due to income earned outside of California or income earned by California partial year residents. It could be an adjustment due to a military pay adjustment issue. Compensation for military service members who are domiciled outside of California is exempt from California tax, for example. If a nonresident owns a business carried on within California such income has a source in California and it is taxable for California. Thus, gross income for this business would be included in the nonresident’s adjusted gross income from all sources for federal purposes. The amount that applies to California will have to be figured out by using an apportionment formula dependent on the percentage of income that was derived from California sources. The nonresident is not normally liable for income earned outside of California but he or she does need to pay tax on income earned from California sources as a nonresident of California. This is different from residents of California who are liable for tax on all income regardless of source. Some states offer a credit for taxes paid to others states in an effort to avoid double taxation of the same income. Most state, including California, offer a credit for taxes paid to other states. This is similar to the credit available by federal for taxes paid to other countries. Credits for taxes paid to other states in the case of California, and credit offered by federal for taxes paid to other countries, is to alleviate any double taxation involved. |
| Asset expense election (IRC Section 179) |
| The idea behind the accelerated depreciation concept is that the equipment use will be more useful in the first years of service. After that, the machine will still be useful, but there will probably be more modern replacements for the equipment. Most companies replace their equipment often to the latest technology after only a few years or even a few months of owning the equipment. This makes perfect business sense. This makes so much perfect |
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| Revised: 07/09/15 |
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