How Are Spousal and Child Support Taxed?

Divorce proceedings can often beckon a slew of financial issues you may not have otherwise considered. You knew your tax filing would change once your divorce was finalized, but your filing status isn’t the only way divorce can affect your taxes. How can you expect your payments or earnings from spousal or child support to be affected? Take a look at the following common scenarios.

Spousal Support

In the state of California, alimony and spousal support is the same thing. Essentially, alimony is money you either pay or receive to support the day-to-day needs of the less financially fit spouse. Examples of alimony may include:

  • Third party payments, like to a mortgage broker or utility company
  • Medical expense payments
  • Direct alimony payments (i.e., money paid directly to the spouse)

There are certain types of payments not considered alimony. For example, under California law, your spouse may be entitled to half of your retirement benefits. This isn’t considered a form of spousal support. Child support payments are separate benefits, and they don’t count as alimony.

If you’re a recipient of alimony, you must report payments as part of your income on your state and federal tax returns. If you’re the spouse making payments, you may write these off as a deduction on your taxes, but only if you meet all of the following requirements:

  • You make payments by cash, check, or money order
  • Your divorce papers specifically stipulate alimony
  • You and your spouse can’t be considered members of the same household
  • Your payment isn’t child support
  • You have no obligation to make payments after the death of your ex-spouse

Sometimes, a divorce decree may designate payments simply as “family support.” If you’re uncertain, enlist the help of a tax advisor to help you determine if what you’re paying or receiving is child support, alimony, or both.

Child Support

Like alimony, child support is a payment rendered to the custodial parent meant to cover a dependent youth’s living expenses. The amount of child support you pay is determined by the amount of money you make. These reparations can be direct or indirect. Indirect payments go to things like school tuition, health insurance companies, or other necessary expenditures.

Child support payments differ greatly from alimony when it comes to taxation. For federal income tax purposes, child support is considered tax-exempt, meaning the recipient doesn’t have to report it as part of his or her household income. Additionally, the spouse who makes the child support payments doesn’t get to use them as deductions on his or her federal taxes.

It’s important to distinguish the difference between family support and child support. When it comes close to tax season, read your divorce decree carefully or find a divorce lawyer with experience handling all types of child and spousal support cases to help you understand the information. If payments are simply categorized as “family support,” they aren’t child support payments, and are therefore subject to tax and deduction. If you’re unsure, it’s always best to ask a tax professional for clarification.

Claiming Children as Dependents

To claim a child as your dependent on your tax return, you must provide over 50% of his or her financial provisions during the tax year. Only one parent can claim the child as a dependent. Generally, the custodial parent is the one who assumes the bulk of the financial responsibility and gets to claim him or her. For more complicated cases, take your tax return to a filing service.

If you have questions about divorce or would like to start a proceeding, contact our experienced and successful San Diego based family law attorneys at Boyd Law for more information. We offer free initial consultations and will work hard to protect your rights.