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Is My Spousal Support or Child Support Tax Deductible / Taxable Income?
Guest Author: Michael J. Kessler, CPA
For those who remember Peter Falk as Detective “Colombo” in that famous 1970’s crime drama, you remember how he usually solved the case. Watch this 30-second clip:
https://www.youtube.com/watch?v=biW9BbWJtQU
As Colombo used to say, “Just one more thing…” But you’ll need to answer many more questions before you can answer this:
Is My Spousal Support Taxable Income / Tax Deductible?
I get these questions a lot: “If I am paying spousal support, do I get a deduction for it on my income tax return?” Conversely: “If I am receiving spousal support do I have to include it as income on my tax return?”
Spousal support (technically called “Maintenance” here in New York State), is what the IRS calls “Alimony”. Spousal support is tax deductible by the paying spouse and spousal support is taxable income to the receiving spouse, provided certain conditions are met.
Do I Have to Claim Child Support As Income on Taxes?
If the IRS had its “druthers”, they’d deem every spousal support payment “Child Support.”
Child support payments are not tax deductible by the paying spouse, nor is child support taxable to the receiving spouse. So why would the IRS love that? Because they lose more tax revenue from alimony deductions than they gain on taxable income from alimony received. This is because the paying spouse – the one getting the tax deduction – is usually in a higher tax bracket than the receiving spouse, so those deductions result in less tax revenue to The Treasury.
It is important that your decree / agreement be clear on these matters. The following is a good roadmap – questions to determine whether your spousal support is taxable income (if you receive) or tax deductible (if you pay):
Is the payment pursuant to any of the following?
- A decree of divorce,
- A decree of separate maintenance,
- A written separation agreement, or
- A decree for temporary support
If yes to at least one of these, go on to the next question below (otherwise payment is neither tax deductible nor taxable income).
Are the spouse’s members of the same household and under decree?
If no, go on to the next question (otherwise payment is neither tax-deductible nor taxable income).
Is the payment in cash or cash equivalent, such as a check or money order?
If yes, go on below (otherwise payment is neither tax-deductible nor taxable
income)
Is payment made directly to the receiving spouse?
If yes, go on. If no, does the payment to a third party benefit the spouse? If yes, go on (otherwise payment is neither tax-deductible nor taxable income)
Does the decree or agreement specifically state that payment is not alimony?
If no, go on (otherwise payment is neither tax-deductible nor taxable income)
Will the spouses file a joint return?
If no, go on (otherwise payment is neither tax-deductible nor taxable income)
Is there an obligation to continue payments after the receiving spouse’s death?
If no, go on (otherwise payment is neither tax-deductible nor taxable income)
If you’ve made it this far, “just one more thing…” (Almost):
Are there any minor children?
If no and you’ve made it this far, THE PAYMENT IS TAX-DEDUCTIBLE BY THE PAYING SPOUSE AND TAXABLE INCOME TO THE RECEIVING SPOUSE
If there are minor children, is the payment child support?
If yes, payment is neither tax-deductible nor taxable income
If no, “just one more thing…” (I think I mean it this time)
Does the payment vary after a child turns 18, leaves school, etc.? IF NO, THE PAYMENT IS TAX-DEDUCTIBLE BY THE PAYING SPOUSE AND TAXABLE INCOME TO THE RECEIVING SPOUSE
If yes, payment is neither tax-deductible nor taxable income.
Oh, and just one more thing – I promise this time:
Even if a payment is determined to be maintenance, the parties can agree or the Court can order that the payment be neither tax-deductible by the paying spouse nor taxable income to the receiving spouse.
Now you know how Colombo did it!
About Mike:
Everything he does, Mike believes in challenging the status quo. He believes in thinking differently from traditional accounting. The way Mike challenges the status quo is by using uncommon strategies to bring his clients and their families into a world where their stress is reduced and their quality of life improves with increased income.
Mike and his wife, Karen, reside in the NY-Metro area where they raised their three sons, all financially independent active duty military officers, and are blessed with three beautiful grandchildren and a fourth on the way.
T: 516-449-2852
