If you’re paying or receiving spousal support or child support, there are some basic tax laws regarding support payments you need to remember. If you receive spousal support, you must declare it as taxable income . If you’re paying spousal support, you can deduct it. Child support is not taxable and not deductible.
Tax Strategy During Divorce Decisions
These rules are important to keep at the front of you’re mind when you and your spouse are working out alimony and child support agreements. The final ruling and decision should reflect your intentions for tax time. A decision that you and your spouse might make is to have the paying spouse agree to pay the recipient spouse’s tax liability.
A Helpful Tip
It might be helpful to try and work out the best tax deal for both spouses. While negotiations might be difficult, this negotiation might save you both around tax season.
To Keep in Mind
If you receive alimony, make sure you plan for the potential tax impact. Your former spouse will not be able to withhold taxes from the support check you receive, so you’ll need to be sure that you’re accounting for that fact when calculating how much you’ll be paying in taxes. You should consider paying quarterly taxes, just so you don’t get hit all at once in April.
If you are paying alimony, always remember that you are able to deduct the support payments on your income tax return, but not child support or distribution of property. Often times the IRS scrutinizes the payments made during the first three years to ensure that the payments were not disguised as property distribution or other post divorce obligations.
Working with a Lawyer
The tax laws that are associated with alimony and child support payments can be very confusing. Working with a lawyer that understands the ins and outs of the tax repercussions of divorce can help mitigate the confusion.
Source: DivorceNet.com, Is Alimony Always Tax Deductible to the Paying Spouse?, 2014
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