Taxable Earnings, Alimony and Alimony • LegalScoops

Taxable income has come to mind for every U.S. citizen as tax season is in full swing. Some people file their income taxes early, but there are many who have waited until the extended deadline this year to file their taxes because they either have to pay or aren’t getting a large return.

When you receive child benefit, you know that the amount granted is “earnings-related” and many parents assume that they need to add their maintenance payments to their taxes as taxable income.

The payee does not claim any taxable income

The Internal Revenue Service does not consider child support as taxable income. This means that, as the payee, you do not need to add child benefit to your income. You cannot take child support payments into account when calculating the earned income credit.

The payer cannot file child support tax deductions

As a payer, you cannot deduct your child’s maintenance payments from your taxable income. If you are the custody parent or the parent the child spends more than half of their time with, you may be able to claim the child as a dependent.

Maintenance payments can also come in, which would change your tax situation.

Maintenance and tax considerations

Child support payments are made in some divorces, and new tax laws have changed the way these payments are treated. For decades, the payer was able to deduct alimony for his federal income taxes.

Changes to payments under agreements made after 2018 will change that.

Maintenance payments cannot be deducted under the new rules. The recipients are not entitled to maintenance as taxable income, so the ex-spouse will benefit most from the new tax laws. According to the new law, the payees have to pay significantly more taxes.

When negotiating a divorce agreement, the parties must take these tax changes into account. The additional tax burden on the payer and the coincidence for the payee must be taken into account. Tax experts recommend all parties involved in divorce proceedings to consider the changes and potentially request lower alimony payments based on the payer’s removal of the tax deduction.

However, nothing will be changed in a divorce settlement before 2019. As part of the new tax changes, those who made arrangements prior to 2019 can continue their deductions. This way, agreements that are often viewed as deductions can remain in place with no changes in the process.

Jacob Maslow

Legal Scoops’ senior editor Jacob Maslow has founded several online newspapers, including the Daily Forex Report and Conservative Free Press

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