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Heather Jones

Whether you are paying or receiving child support, it is important to know the tax impact of that support. Typically, when parties with children divorce or have a child out of a non-marital relationship, there is a court order entered establishing monthly child support and health insurance coverage for the child or children of the relationship. Many people do not have a clear understanding of the tax implications of the child support award for them personally.  

People also wonder if alimony, or spousal support as it is referred to in some jurisdictions, is taxable income or can be counted as a deduction. Read on to find out more about the tax issues related to child support and alimony.  

Key Takeaways

  • Child support payments are not taxable for the recipient nor deductible for the payer, per IRS guidelines.
  • Alimony payments are taxable or deductible depending on the execution date of the divorce or separation instrument, with significant changes after December 31, 2018.
  • It's crucial to consult with an attorney to understand the tax implications of child support and alimony in your specific case.
  • Child Support

    Child support is awarded by a court in accordance with the law of the state that the child support is requested in. A majority of states use a formula that is codified by statute, in other words the formula to calculate child support is set into law and everyone uses it. An example of the calculation, with room for deviation based on circumstances is a percentage of the payors gross monthly income based on how many children require support.  

     

    The gross income of the payor is taken into account when performing the calculation, not the net take-home pay. The reason gross income is considered is that the courts want to avoid manipulation of net pay through deductions and exemptions. Unfortunately, the misunderstanding that child support is for the other parent and not the child creates a great deal of bad feeling in some payors, and they go to extreme lengths to avoid "giving money to their ex" by manipulating their take-home pay. 

     

    According to the IRS.gov website, "Child support payments are not taxable to the recipient (and not deductible by the payer). When you calculate your gross income to see whether you're required to file a tax return, don't include child support payments received." 

     

    In plain language, that means neither party on either side of the child support order can deduct for child support they pay out or pay tax on child support payments received.  

    Alimony or Spousal Support: 

    Alimony and spousal support are just different names for the same thing: payments made to your former spouse in a specific amount for a set period of time. Spousal support is rarely given for the rest of one person's life; it is usually awarded for a term of months or years, either short or long, depending on the circumstances of the case.  

     

    Alimony may be subject to tax, according to IRS.gov

     

    Alimony (including separation or maintenance payments) may be subject to tax depending on several factors, including the execution date of the divorce or separation instrument. In general, the term "divorce or separation instrument" means your divorce decree, separation agreement or decree, or order of temporary maintenance.  

    Under divorce or separation instruments executed on or before December 31, 2018, alimony payments are taxable to the recipient (and deductible by the payer). When you calculate your gross income to see whether you're required to file a tax return, include these alimony payments. 

    However, under divorce or separation instruments executed (1) after December 31, 2018, or (2) on or before December 31, 2018, but modified after this date, alimony payments are not taxable to the recipient (and not deductible by the payor) if the modification expressly provides that alimony payments are neither includable in nor deductible from, income. When you calculate your gross income to see whether you're required to file a tax return, don't include these alimony payments. 

     

    As you can see, there are a lot of factors to consider when dealing with taxes on spousal support. The best thing to do is to discuss these issues with your attorney as soon as possible so that you can plan accordingly. 

    Disclaimer: The information provided on this blog is intended for general informational purposes only and should not be construed as legal advice on any subject matter. This information is not intended to create, and receipt or viewing does not constitute an attorney-client relationship. Each individual's legal needs are unique, and these materials may not be applicable to your legal situation. Always seek the advice of a competent attorney with any questions you may have regarding a legal issue. Do not disregard professional legal advice or delay in seeking it because of something you have read on this blog.

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