With April 15 is just around the corner, many of our readers will be curious about how divorce and taxes interact. We would like to share some of the basics of divorce and taxation with you.
A well-structured divorce takes taxes into account. One of the most common tax issues that come up in divorce is how to structure payments from one ex-spouse to the other. At first glance, alimony and child support seem very similar. After all, they are both payments sent from on ex to the other. However, alimony is very different from child support when taxes are considered.
In most cases, the amount of alimony paid is deductible for the paying spouse and it can lower the paying spouse's tax bill. In tax jargon, alimony is considered an "above the line" deduction, which means you can claim it even if you do not itemize your deductions on your tax return. However, alimony is generally considered to be taxable income for the spouse who receives it. In order to be eligible to claim an alimony deduction, the alimony must be ordered by a written divorce or separation agreement or order.
The IRS has also developed some guidelines for preventing people from using alimony to pay for what is really child support. That is because child support is not deductible on your taxes. Child support does not give the paying spouse a tax deduction and it does not count as taxable income to the receiving spouse.
When writing a divorce agreement, experienced family law attorneys understand how important the tax implications can be. If you have questions about alimony, child support or taxes in a divorce, an experienced family law attorney can help.