How Do Alimony And Child Support Affect Your Taxes?

Now that tax season is past again, people are even more stressed out than before about their finances.  Now that you are happily single, you spent the first few months of the year feeling relieved that you do not have to ask your spouse’s permission every time you pay to stream a movie on Apple or buy dinner from Chick-fil-A, but once you see how little money you have left after you pay your tax, it is tempting to pick up the phone and yell and your ex about the financial hardship he or she caused by leaving you with so little of the marital wealth and so much of the financial responsibility for your children.  As with so many conflicts with your ex-spouse, you can prevent the tax season fights by working out all of your tax related issues before you finalize your divorce, even if it means that your divorce mediation takes longer than it otherwise would have.  Couples cannot always foresee how the terms of their divorce will affect their tax obligations, so the best way to reduce financial stress during and after your divorce is to contact a Birmingham divorce lawyer.

Child Support Payments Fly Under the Radar of the IRS

Child support payments do not affect your taxes.  Consider that, if you were married, the money that you paid for your minor children’s expenses would not count as itemized tax deductions.  Therefore, paying child support to your ex-spouse is not a tax-deductible expense; you do not subtract the amount of child support you paid from your gross income.  Likewise, if your ex-spouse pays child support to you, it does not count as taxable income.

Which Parent Can Claim the Children as Dependents for Tax Purposes?

Dividing the financial responsibility for the children between the two parents is never as simple as it sounds.  The child support order takes into account each parent’s income and each parent’s share of parenting time, but then there is the issue of which parent claims the children as dependents for tax purposes.  In any given year, only one parent can claim the children, and there is no uniform rule about which parent it should be.  You and your spouse must agree about this during mediation; you can even decide to alternate years of claiming the children as dependents.

Alimony Orders Should Include Provisions About Your Taxes

In the old days, alimony payments used to count as tax deductible expenses for the paying spouse and taxable income for the recipient, but this is no longer the case.  For alimony orders issued or modified in 2019 or later, you have the option to indicate that the alimony amount is not taxable or tax deductible.

Contact Peeples Law About Taxes During and After Divorce

A Birmingham family law attorney can help you make strategic decisions about your divorce to prevent your ex-spouse and the IRS from impoverishing you.  Contact Peeples Law today to schedule a consultation.

Source:

irs.gov/faqs/interest-dividends-other-types-of-income/alimony-child-support-court-awards-damages/alimony-child-support-court-awards-damages-1