Three Things That Make Everyone Feel Broke: Alimony, Child Support, and Taxes

After the first year of co-parenting after divorce, you settle into a new normal.  You enjoy every moment of ordering from the McDonald’s dollar menu and watching Netflix with your kids on the weekend nights when your children are with you, and on the nights when your kids are with your ex-spouse, you take advantage of the peace and quiet by being productive and by catching up on sleep.  Once tax season comes around, though, all the stress and resentment of your divorce come roaring back.  You contribute so much to your children’s financial support while your ex contributes so little, and here you are again, stuck with this hefty tax bill, and to add insult to injury, your ex is chilling in your former marital home while you are struggling with the astronomical costs of housing.  For help understanding how your divorce settlement will affect your taxes or resolving tax-related conflicts with your ex-spouse, contact a Boca Raton divorce lawyer.

Child Support Payments Are Tax Neutral

For the parent who pays child support, the payments are not tax-deductible expenses.  Likewise, they are not taxable income for the parent who receives the payments.  The IRS assumes that both parents’ contributions to their children’s financial support are just an ordinary part of household finances.  It deals with them by letting one parent claim the children as dependents, rather than by counting how much money each parent spends toward the children’s expenses.

New Rules About Alimony Orders and Tax Obligations

Before 2019, alimony payments always counted as tax-deductible expenses for the former spouse paying the alimony, and they always counted as taxable income for the recipient.  For alimony orders issued or modified during or after 2019, the tax implications of the alimony order vary on a case-by-case basis.  If you and your spouse agree to an alimony arrangement during mediation, you should indicate whether the alimony amount will be tax-deductible for the paying spouse and whether it will count as taxable income for the recipient spouse.

Which Parent Can Claim the Children as Dependents on Tax Returns?

Child support payments are just a matter of plugging numbers into a spreadsheet.  How many days of parenting time does each parent have?  How much is each parent’s income?  The child support amount calculated according to the statewide guidelines does not tell the whole story; there is still room for disagreement about financial matters related to co-parenting.  For example, parents often disagree over which parent must provide health insurance for the children.  Likewise, only one parent can claim the children as dependents on their income tax returns in any given year.  Which parent claims the children as dependents is often a hotly contested issue, and sometimes the parents agree to alternate years.

Contact Schwartz | White About Disputes Over Taxes After Divorce

A South Florida family law attorney can help you arrive at a divorce settlement that does not leave you with an unaffordable tax burden.  Contact Schwartz | White in Boca Raton, Florida about your case.

Source:

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