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What are the tax implications for spousal support?

On Behalf of | Aug 7, 2015 | Alimony

Whether or not you pay or receive child support or alimony as part of your divorce order will have implications beyond the size of your bank account. Single, married or divorced, income tax time will come. And the terms of your divorce may affect how much you are expected to pay.

In general, alimony, also known as spousal support, is tax deductible to the former spouse who is paying it. However, a parent cannot deduct what he or she paid in child support during the year. For the ex receiving these payments, alimony is taxable income, while child support is not, as Business Management Daily explains.

Before claiming your alimony payments as a deduction, make sure that it is truly alimony as the IRS defines it. Tax law and regulations contain certain standards, for instance that the payments be made in cash or an equivalent. Also, the payments must be made as part of a divorce or separation agreement, not an informal arrangement. Also, the agreement cannot specifically call the alleged alimony payments nontaxable and nondeductible.

One can use this knowledge when negotiating a divorce settlement. Consider if the alimony payment you are asking for may lead to a larger income tax bill than you can afford. On the other side of the table, agreeing to pay alimony may be easier if you know you will be able to deduct it from your taxes.

Child support does not affect your taxes, but few parents would want their kids to do without basic necessities because the parents are no longer living together.