Alimony and Taxes v. Child Support and Taxes

There’s a basic tax law that can often be passed over, ignored, or misinterpreted, if you’re in the midst of an emotional divorce. Regardless of how intense or difficult your divorce is though, you will need to keep this in mind: Alimony payments are tax deductible. Child support payments are not tax deductible. Additionally, alimony payments are taxable to the recipient. Amounts paid for child support are tax free to the recipient.

Tax Strategy During Divorce

It’s important to be mindful of this basic tax law and the ramifications while you’re negotiating the divorce. You should ensure the ruling of alimony or child support properly reflects the tax intentions. And it should be noted that even if the payments are characterized as “alimony” by both sides doesn’t ensure that it will be deductible. There are requirements that need to be met in order for things to be classified as deductible alimony.

Tax-law Requirements to be Considered Deductible Alimony

These are the tax-law requirements that must be met:

  • The alimony payment must be made in cash or cash equivalent.
  • The alimony payment must be received by a spouse under a divorce or separation agreement. The payment can also be received on behalf of a spouse. This agreement cannot designate the payment as being nontaxable to the recipient spouse and nondeductible by the payer spouse.
  • During the time of the payment the payer spouse and the recipient spouse cannot be living together as members of the same household.
  • There is no liability to make a payment for any period after the death of the recipient spouse or to make a substitute payment in such a situation.
  • Spouses are not allowed to file a joint tax return with each other in the same year as the payment was made.

A Helpful Tip

It might be helpful to work out the best tax deal you can under the circumstances. So if you are able to negotiate with your ex-spouse you should both try.

For advice on divorce, you need the expert law firm of Korol and Velen, certified family law specialists. Schedule a consultation today.

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