Child support is neither taxable income to the recipient nor a taxable deduction for the paying party. However,alimonyor maintenanceisan incometax deductionfor the paying party and consideredtaxable incomefor the receiving party.
Whenalimonyis a part of the divorce decree or settlement agreement, care must be taken to properly draft the papers and make sure that payments are qualified for a tax deduction by theIRS. You do not want to pay your ex-spousealimonyfor a year only to have theIRSdisallow the tax deduction.
IRS Publication 504specifies the requirements foralimonyto be allowed as a deduction. First, the payments must be specified asalimonyin the decree or property settlement agreement. Though payments can be made to a third party, the ex must consent in writing. Since the payment must be in cash, trading off property for alimony is not sufficient. The decree must also provide that alimony will cease upon the death of the recipient.
At times, theIRSwill look to the documents and determine that payments are actually child support rather thanalimony. Generally, this issue arises if the payment is tied to any event related to a child. If payments are reduced or eliminated when the child reaches a certain age, leaves the home or becomes employed, theIRSmay deem payments to be child support and disqualify the deduction.
If You Have Questions Please Feel Free To Contact Our Office.
Ryan K McFarland • attorneymcfarland@gmail.com•1 (931) 919-4376
Whenalimonyis a part of the divorce decree or settlement agreement, care must be taken to properly draft the papers and make sure that payments are qualified for a tax deduction by theIRS. You do not want to pay your ex-spousealimonyfor a year only to have theIRSdisallow the tax deduction.
IRS Publication 504specifies the requirements foralimonyto be allowed as a deduction. First, the payments must be specified asalimonyin the decree or property settlement agreement. Though payments can be made to a third party, the ex must consent in writing. Since the payment must be in cash, trading off property for alimony is not sufficient. The decree must also provide that alimony will cease upon the death of the recipient.
At times, theIRSwill look to the documents and determine that payments are actually child support rather thanalimony. Generally, this issue arises if the payment is tied to any event related to a child. If payments are reduced or eliminated when the child reaches a certain age, leaves the home or becomes employed, theIRSmay deem payments to be child support and disqualify the deduction.
If You Have Questions Please Feel Free To Contact Our Office.
Ryan K McFarland • attorneymcfarland@gmail.com•1 (931) 919-4376