Tax Implications Of Alimony & Child Support

In a divorce case the judge may be order one spouse to pay the other spouse alimony or spousal support. The judge handling your divorce will look at several factors when deciding whether or not to order spousal support and how much. These factors may include:

• How long you and your spouse were married
• Income and expenses of you and your spouse
• The ability of the requesting spouse to create an income
• The income needs of the spouses

The positive side of paying spousal support is that it’s tax deductible to the spouse who is ordered to pay it. While the spouse receiving alimony must claim the support as income on his or her taxes. If you receive spousal support, because taxes are not automatically taken out, it may be wise to make quarterly estimated tax payments. This can help to alleviate owing at the end of the year. Of course if you are employed, you may opt to deduct a slightly higher amount of taxes from your paycheck to cover this amount.

The IRS considers alimony any payment that is made pursuant to a court ordered divorce or separation agreement. If payments are made to the other spouse voluntarily for any reason, they are not considered alimony and can’t be deducted. It is also required that the two of you do not live together while payments are being made. Making payments to a spouse who lives with you is not considered alimony by the IRS.

There are instances that would subject you to what is called the recapture rule. This means if the amount of support paid and received significantly decreases by the third year or is terminated; the spouse paying support can partially claim support that was previously claimed. This also subjects the receiving spouse to claim income was already claimed previously. The recapture would apply if:

• The divorce agreement has been changed
• The paying spouse failed to make timely payments
• A change in financial circumstances such as loss of income for the paying spouse or increase of income of the receiving spouse

The tax implications of child support are quite contrary to that of alimony. Child support is not considered an income. It is not tax deductible for the paying spouse. Further, the spouse receiving child support does not claim the payments as income.

Call (702) 914-0400 to talk with a Child Support Attorney