Tax consequences of alimony and child support – The two main types of financial support which can be ordered by the court in a family law case are spousal support (alimony) and child support. In some of our earlier entries, we’ve discussed how both of these types of support can be requested and how the amounts are calculated in North Carolina. The purpose of this entry to is to discuss how these types of support might be classified for tax purposes.
How is Alimony Viewed for Tax Purposes?
If your divorce was finalized prior to 2019, then according to the IRS website, alimony is deductible by the payer spouse and the recipient spouse must include the payments as income. A payment is alimony only if all the following requirements are met:
- The spouses don’t file a joint return with each other;
- The payment is in cash (including checks or money orders);
- The payment is to or for a spouse or a former spouse made under a divorce or separation instrument;
- The divorce or separation instrument doesn’t designate the payment as not alimony;
- The spouses aren’t members of the same household when the payment is made (This requirement applies only if the spouses are legally separated under a decree of divorce or of separate maintenance.);
- There’s no liability to make the payment (in cash or property) after the death of the recipient spouse; and
- The payment isn’t treated as child support or a property settlement.
If your divorce will be finalized in 2019, then alimony payments are not tax deductible. This is due to the Tax Cuts and Jobs Act, which was signed into law in late 2017. The Act eliminated the possibility of deducting alimony payments from taxes for tax years 2019-2025.
How is Child Support Viewed for Tax Purposes?
Because of the Tax Cuts and Jobs Act, there is no longer a personal exemption for claiming a child as a dependent on an individual’s federal taxes. North Carolina’s General Assembly has not effected any change to its tax law which mirrors the federal change, so for the time being, people would still be able to claim their children as dependents on their state taxes.
Consider setting up a consultation with a family law attorney at Gilles Law, PLLC. You can reach us at 980-272-8438 at our office in Uptown Charlotte. We invite your inquiries.
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