In a divorce, couples must address many financial issues, such as the ownership of the marital home and responsibility for debts incurred during the marriage. One of the biggest questions may revolve around whether one spouse will be entitled to alimony and/or child support. If you are receiving support – or may be paying it – it is important to understand the differences between alimony and child support and why those differences matter to you.
Alimony vs. Child Support
The main difference between alimony and child support is the intended use of each payment. Alimony is paid for the benefit of the spouse. Child support is paid to meet the basic needs of the child, such as food, clothing, medical care, shelter, and other necessities.
Who Benefits from Alimony and Child Support?
Alimony, sometimes referred to as “spousal support,” is an amount paid from one spouse to the other after a divorce. A judge may order alimony to be paid for a specified period or until the receiving spouse remarries.
Alimony generally aims to help the receiving spouse maintain a lifestyle similar to that which they were accustomed to during the marriage. It is not granted automatically – the spouse who needs alimony must request it.
Child support payments are made to cover the basic expenses of the child, which may include food, housing, clothing, medical care, and other general costs.
Tax Treatment of Alimony and Child Support
How alimony is treated for tax purposes depends on whether you are paying it or receiving it and when your divorce agreement was finalized. If your divorce agreement was finalized before December 31, 2018, and you are paying alimony to your ex-spouse, those amounts are tax-deductible. This means you can deduct the alimony you paid from your taxable income for the year, thus reducing your taxes.
On the other hand, if you are receiving alimony payments, you must report them as taxable income on your tax return. Again, this only applies if your divorce agreement was finalized before December 31, 2018.
It is worth noting that the Tax Cuts and Jobs Act eliminated the alimony deduction and the requirement to claim alimony as taxable income for divorces finalized after December 31, 2018.
Since child support is designed to benefit the children, it is not considered taxable income for the person receiving it. Additionally, child support payments cannot be deducted by the parent making them.
IRS Rules Regarding Alimony and Child Support
The IRS has several requirements regarding both alimony and child support payments. For alimony, these rules relate to how to deduct or report alimony income. For child support, the IRS rules establish who the custodial parent is and who can claim the child as a dependent. This is important because, in most cases, the non-custodial parent is expected to pay child support.
Alimony Rules
The IRS has several requirements that must be met for spousal support payments to be considered qualified alimony and thus tax-deductible for divorce agreements finalized before December 31, 2018.
To qualify for alimony, former spouses must meet the following conditions:
- They cannot file a joint tax return.
- Payments must be in cash or by check or money order.
- Payments must be required under the divorce or separation agreement.
- The divorce or separation agreement cannot classify the payments as non-qualifying alimony.
- Payments must be…
- Don’t couples live in the same house when alimony payments are made.
- There is no obligation to continue payments in the event of the receiving spouse’s death.
- Payments are not considered child support or property settlement.
If you qualify for a deduction for alimony you have paid, you can do so on your Form 1040, using Schedule 1. You will need to enter your ex-spouse’s Social Security number or Individual Tax Identification Number on the form. Otherwise, the IRS may disallow the deduction.
If you are receiving alimony, which is considered taxable income, you must also report it on Form 1040, Schedule 1. You will also need to include your ex-spouse’s Social Security number or tax identification number.
Child Support Rules
Since child support is not tax-deductible and is not considered taxable income, there are no reporting requirements for payments received or made. However, parents must be careful when claiming children as dependents for tax purposes.
Generally, the parent who lives with the child for most of the year is considered the custodial parent for tax purposes. This parent can claim the child as a dependent, provided they meet the requirements for claiming children as dependents.
However, the non-custodial parent can claim the child as a dependent if the separation or divorce agreement states that they can. In this case, the custodial parent must sign Form 8332 to release their right to claim the child as a dependent.
What Determines Alimony and Child Support Payments?
There is no one-size-fits-all rule for determining alimony or child support payments. Both are governed by factors that state laws take into consideration.
Factors Determining Alimony Payments
For alimony, courts can use a number of factors to determine payment amounts, including:
- Each spouse’s income and employment status.
- Their personal expenses.
- How assets were divided in the divorce.
- The duration of the marriage.
- The age of each spouse.
Alimony can be modified after divorce in certain circumstances. For example, if the paying spouse loses their job, they can request a reduction in the payment amount. Similarly, if the recipient spouse sees an increase in living costs, they can request an increase in the support amount.
Factors Determining Child Support Payments
Whether child support is secured by a court order and at what amount significantly depends on the final child custody agreement and state law. For example, some states may not issue support orders if both parents earn similar incomes and share custody equally, and some states may base support on the number of children in the household and the income of the non-custodial parent.
The duration of child support payments also largely depends on state law and each parent’s financial situation. For example, a child support order may last until the child turns 18, or the paying parent may be required to continue providing financial support beyond that date in the form of help with college expenses.
Conclusion: Talk to a Lawyer
If you are unsure about the differences between alimony and child support, and your obligations concerning either, a divorce attorney can be a valuable source of information. Even if you have not yet initiated divorce proceedings, they can advise you on the best course of action regarding alimony or child support payments.
Frequently Asked Questions (FAQs)
How much tax do I pay on alimony I receive?
If your divorce agreement was finalized after December 31, 2018, the payments you receive for alimony are not considered taxable income, and therefore you do not have to pay any taxes on them.
Why
Can child support be deducted from taxes?
Child support payments are made to meet the child’s basic expenses after divorce. They are not tax-deductible for the payments and are not considered taxable income for the parent receiving them. Think of it this way – if you take your child to buy new shoes, you cannot claim a tax deduction for that. Child support works the same way.
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Sources:
The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts in our articles. Read our editorial process to learn more about how we fact-check and maintain the accuracy, reliability, and quality of our content.
Family Court of Delaware. “Spousal Support.”
USA.gov. “Find Help Collecting Child Support.”
IRS. “Topic No. 452: Alimony and Separate Maintenance.”
Source: https://www.thebalancemoney.com/differences-between-alimony-and-child-support-4687156
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