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Alimony and child support have different tax consequences

When the members of a family live together and the parents of the family work and earn incomes, generally the money they bring in is pooled together for the support and maintenance of everyone in the household. However, when parents separate or divorce and divide their incomes to support two different households, the financial maintenance of the family's members can become more subject to change. In Washington and other American jurisdictions, courts can assign some parties to pay child support and spousal support, also called alimony, for the care of those individuals who no longer live in the payers' homes.

How those payments are classified can make a big impact, though, on whether they are tax deductible for the paying party. For example, alimony or spousal support can be tax deductible for the paying party and included in the income of the recipient if it is for cash or a cash equivalent, given pursuant to a divorce order or agreement, paid to one's ex and meets several other criteria.

Child support, however, is never tax deductible. Parents have an obligation to financially support their children, and child support is therefore a necessary transaction to ensure that the kids' needs are met. Parents may seek to have their child support obligations terminated, though, if their children reach adulthood or otherwise qualify to have their support cut off.

As with all transactions related to family law matters readers are encourage to keep records of the child and spousal support payments they make and receive. Those records can be very useful if disputes ever arise regarding nonpayment or noncompliance with the terms of a family law order. Additional questions regarding these and other divorce-related topics should be raised with readers' family law attorneys.

Source: marketwatch.com, "How to make your alimony payments tax-deductible," Bill Bischoff, Aug. 15, 2017

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