How Spousal Support Can Affect Your Taxes

Date Posted:August 6, 2015 | Categories:

Spousal Support Affect Taxes

If you are the recipient of alimony payments, those payments are taxable as additional income to you. Because no taxes are withheld from the alimony payment, you may want to consider how you will plan to pay the taxes on this income. If you have no other income, you should think about filing quarterly tax payments to the Internal Revenue Service (IRS).

Here is a link to useful information from the IRS about alimony that the recipient should be aware of: http://www.irs.gov/publications/p17/ch18.html Also, the IRS has a publication that will help you estimate your taxes (IRS Publication 505, Tax Withholding and Estimated Taxes) and one that will give you more information you should know regarding alimony income and your taxes IRS Publication 504, Divorced or Separated Individuals). Both of these publications are available at www.irs.gov

If you pay alimony, the annual amount you pay is deducted from your income on line 31 of the 1040 IRS form. The payer must also enter the ex-spouse’s social security number so payment amounts may be cross-checked against how much the ex-spouse claims as income. However, child support is not deductible or taxable. Also be aware that the IRS will scrutinize your first three years of alimony payments in order to be assured that you’re not trying to hide property distribution or other post-divorce settlements such as attorneys’ fees as deductible support.

Also, if you tie spousal support in any way to child support – such as terminating it once the children graduate high school – that will give the IRS latitude to question whether you’ve actually been paying child support while claiming alimony. Remember, alimony is deductible, but child support is not.

What should be clear from this short article is that there is a great deal to be considered in structuring your divorce settlement, whether you are the payer or the recipient. There are strategies that a seasoned, experienced attorney can help you employ so that the settlement you agree on is to the best possible advantage of both you and your children. Remember it is imperative that you discuss the tax consequences of your overall settlement with your attorney prior to signing off on the final settlement.

Do You Need Information About Spousal Support?

At Edward F. Whipps & Associates, our family attorneys understand the complexities posed by structuring your divorce settlement and can help you navigate those difficulties to the best possible advantage of you and your children. Our experienced attorneys can help you on this journey.