Main Questions for Alimony, Child Support, And Taxes

alimony

Many people have difficulty in telling how alimony differs from child support. It lies in their purposes. Alimony is paid as financial help for the second spouse, while child support is a payment meant to provide the basic needs of children. These basic needs include medical care, clothes, education, food, housing, and others.

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How is the amount of alimony determined?

The amount of alimony is calculated individually based on several factors. These are the following: length of the marriage; income of paying spouse, the income of receiving spouse; their future earning prospect; their lifestyle and expenses. To paraphrase, if there is a long marriage, and while one spouse did not advance his or her career because of children and the others did, then one of the spouses would be awarded additional payments.

The percentage of alimony from the income of the paying parent is usually 10-30 percent. However, there is a rule that the amount of alimony largely depends on the sum income of both ex-partners. For example, the lower the wife’s salary is, the more the husband has to pay.

Here is a list of things that determine alimony:

  • It is paid only in cash or cheque.
  • It is received fully or on behalf of the spouse;
  • It is paid by the parent who spends less time with the child and is received by the parent who takes permanent care of it.
  • Alimony is only paid if the former spouses live in the same household.

If the payments do not fit into these boundaries, both spouses are influenced. The one who pays will get fewer deductions, which equals to lower tax liability. The parent living with the child and receiving these payments will have a lower income tax. But this is how it was before January 1st of 2019.

According to the new law, the person who is paying spousal support will not be able to deduct it from their taxes.

What determines child support payments?

The amount of child support is hugely influenced by custody agreements and state law. To illustrate, some states do not give approval for child support if the income of both parents is relatively the same or they bring up their children together.

Traditionally, the custodial parent pays for kid’s needs until the age of 18, when an individual is more or less independent and is capable of earning money by themselves. However, payments can transform into tuition fee assistance.

Parents must decide on the schedule of child support payments. If they cannot manage to come up with a common decision, then the court will propose their own plan. This plan would be created regarding each spouse’s share in the common income. For example, one parent earns $27,000 a year, and the other has an income of $73,000. Thus, the first person’s share is approximately 1/3 of the total family income and the other’s is 2/3. The court will propose the schedule which lasts for three years and would be repeated after the three years have concluded. The custodial parent, who earns 1/3 of the total income, takes the deduction for the first year, while the non-custodial parent, who has a share of 2/3, takes the deduction for the following two years.

However, if a parent has an unsuccessful alimony payment history, he or she can be deprived of the right to take the dependency exemption.

Both child support and alimony can be modified. If an alimony-paying parent cannot manage to pay child support on time, then they must resort to the court with a request to make changes in the contract.

Summary

There are a lot of rules on the topic of alimony, child support, and taxes. To get more information on your case, do further research and read the state law. The main point is that alimony is most probably taxable as it is paid to the other spouse, while child support is not because it is paid to fulfill the child’s needs.

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