Are child support and alimony taxable?

 

Are child support and alimony taxable?
Can you deduct your support payments?

The cost of child support and alimony are important elements of many Massachusetts divorce cases.  When thinking about the types of support you might receive or pay, understanding the tax implications is crucial.   For higher-income families, some divorce agreements or even temporary orders may provide for a blended order, meaning that part of the support is treated as child support, and another portion is considered alimony, also known as spousal support.

Is Child Support I Receive Taxable?

The tax implications of child support are easy to understand – there aren’t any!  Allow me to explain.  If you receive child support, it does not count as income for tax purposes.  Yes, it looks and feels like income, but you do not have to pay taxes on it.   You may declare the child support when applying for a loan, but that does not change the fact that child support is non-taxable income.

Can I Deduct My Child Support Payments?

Child support payments are not tax deductible. Thus, the tax issues surrounding child support are straightforward –  it is not income for tax purposes nor is it deductible for the payor.

Tax Treatment of Alimony

You can think of the tax treatment of alimony as the opposite of child support; meaning that if you receive alimony it is taxable income to the recipient.  On the flip-side, if you pay alimony it is deductible from your income.

Requirements to Deduct Alimony Payments

To get a deduction for alimony payments, the following conditions must be satisfied:

1. Be paid in cash or a check – you cannot give your former spouse something else of value, such as a vacation home or a car, and then try to label it alimony.
2. Payments must be set forth in writing under a divorce or separation instrument” per the IRS.  Your divorce agreement or a court order count.
3. Cannot file a joint tax return.
4. No payments made to an ex-spouse living under the same roof post-divorce.
5. Payments cannot be disguised as child support, or tied to a qualifying event, such as a child turning 18.

If you receive alimony, make sure you are managing your finances so you have funds available to cover the tax liability in April.

Are there other kinds of support payments used at the time of divorce or separation?

Why yes, unallocated family support is the third type of support, often lost between the two more common categories of child support and alimony.   To learn more about using this interesting category of support, please click here to read our post about unallocated family support.

Stephen McDonough is a divorce mediator and family attorney at Next Phase Legal in Norfolk, MA.  Next Phase Legal concentrates in divorce, child support, alimony, and related family law issues in the Metrowest MA area, including Dedham, Westwood, Walpole, Norwood, Millis, Medway, Franklin, Dover, Sherborn, Natick, Sharon, Canton, and Foxboro. To learn more about the cost of child support in Massachusetts please contact us today.

Call Next Phase Legal for your informative consultation, (508) 359-4043.