The certainties of death and taxes are inescapable, as is the certainty that divorce will change your tax situation. If you’re getting divorced, you may need to think about child support, alimony, and taxes – along with other tax issues.
In this series, we look at some of the key issues surrounding divorce and taxes so you can gain the clarity you need to have informed conversations with your attorney and your CPA. That can be important to help them protect your interests.
Last time in the series, we discussed four things to consider when mediating or negotiating your divorce decree. When it comes to our topic for this installment — child support, alimony, and taxes — you may find some surprises.
Child Support and Taxes
If you receive child support, you don’t have to report it as income.
If you pay child support, you don’t get to deduct it on your taxes… and you don’t get to claim the child on your taxes just because you pay support. The parent who gets to take the dependency exemption for the child depends upon your Divorce Decree, temporary order, and/or the tax code.
Alimony and Taxes — A Different Animal
Alimony (spousal support) is altogether different than child support when it comes to tax rules. If you receive alimony, you have to report it on your taxes as income. If you pay alimony, your spousal support payments are tax deductible.
Getting Slick with Spousal Support and Taxes — A Sticking Point for the IRS
If your decree structures alimony payments to be high in the first couple of years and then drop off, the IRS may consider those payments to be a property settlement rather than alimony and you may not be able to deduct them.
Know Your Decree
Be mindful of child and spousal support tax implications when you’re negotiating or mediating your decree – including who will claim exemptions for the children.
A Word About Backsies
If you reach an agreement and a temporary order or final decree is entered, but your spouse changes their mind later, you may want to file your taxes before your spouse. That is unless you need them to sign IRS Form 8332 and they refuse. If that happens, talk to an experienced attorney about enforcement options as soon as you can.
If you don’t need your spouse to sign Form 8332, and they tell you they’re taking the dependency exemption when they aren’t entitled, you may come out ahead if you file first because the IRS will credit the first person who files and claims the exemption.
For more on filing child support and taxes and alimony and taxes, see IRS publication 504.
Next in the Series…
Next time in the series we look at things to think about when negotiating the property settlement agreement in your divorce.
This article should not be construed as legal advice. Situations are different and it’s impossible to provide legal advice for every situation without knowing the individual facts.
Author, Hightower Reff Partner Attorney Tracy Hightower, holds both a Juris Doctor and a Master of Laws in Taxation. For more about Tracy, visit her profile page.
If you need help with an Omaha area divorce or other Omaha family law case, contact Hightower Reff Law today and come visit with one of the attorneys at the Omaha office.