Can someone declare spousal support as child support to save on taxes?
Spousal support, or alimony, is taxable to the recipient and tax deductible to the payer. Child support is not taxable or tax deductible. In other words, alimony is really paid out of your gross income but child support is paid out of your net income. So if you’re looking to save on taxes, claiming spousal support as child support won’t help you out.
The parties can negotiate their agreement however they want, so long as they do so with the guidance of counsel and with the guidance of a tax expert, especially when we’re dealing with tax consequences. There are times when parties may agree to pay more or less in alimony and therefore adjust the child support accordingly depending on the incomes of the parties and deductions to which the parties have agreed.
If one spouse is a high-income spouse and the other spouse is not, then by paying more or less alimony to the other spouse may give one spouse more in his or her pocket while the other spouse has a greater tax deduction. However, keep in mind that child support is not a taxable event.
I would not recommend that all payments be taxable to the payee, as then the person is incurring tax consequences on child support that would not be a taxable event. When we deal with these issues, I try to sit down and really have to look at the numbers and look to what’s in the best interests of our client to make sure they’re getting the best deal that they can. I will turn to experts to assist us to make sure that we’re considering factors, since I am not a tax attorney.
New Jersey attorney Cynthia Ann Brassington is certified by the Supreme Court of New Jersey as a Matrimonial Law Attorney, and regularly helps people to resolve their divorce-related issues, from property division, to child support, and custody. To learn more about Cynthia and her practice visit www.LinwoodFamilyLaw.com.