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The Law Offices of Paul H. Nathan

Plan Ahead to Avoid Paying Unnecessary Taxes on Child Support

March is tax season. As you fill out your 1040, you may be wondering who pays taxes on the support payments that you receive from your ex. According to the Internal Revenue Service (IRS), it depends on the type of support.

Child support is “tax neutral.” This means that you don’t have to claim the child support that you receive from your ex-spouse as income. In addition, child support paid to you cannot be deducted by your ex. He still has to pay taxes on that money.

California spousal support is taxable. You must claim any spousal support paid to you as taxable income. If you receive $2,000 a month in spousal support, you will need to add $24,000 to your gross income when calculating your taxes. Your ex-spouse may deduct the alimony from his gross income when paying taxes.

Because of the tax advantage to the payer, many couples will agree to greater alimony payments and less child support. However, the IRS may question such an arrangement.

If the amount of alimony paid to you changes when your child reaches a certain age, the IRS will treat that difference as child support. Suppose your spousal support is $2,000 a month, but drops to $1,000 when your child turns 18, the IRS will see the $1,000 difference as child support because it is no longer paid when your child reached the age of majority. If your ex has not been paying taxes on this amount, the IRS may bill him the difference. Over 15 years, that money could add up to a significant tax bill.

What if your California support agreement simply says $500 per week in spousal and child support? If the amount allocated to child support is not spelled out, you could end up paying taxes on the entire sum.

Protect your pocketbook. Ask your California child support lawyer to make sure that your support order clearly spells out what money is intended for care of the children and what money is intended for spousal support. 

The San Francisco child support attorneys at Law Offices of Paul H. Nathan work to protect your assets during and after your divorce. To schedule an appointment, call 415-341-1144.