Should I let my ex pay more alimony and less child support for tax reasons?

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Question:

My ex-husband wants to increase the amount of alimony and decrease the amount of child support (but still pay the same amount of money each month), which he says is for tax reasons. How would this affect my taxes?

Answer:

For federal income tax purposes, child support is tax-free to the recipient but not tax-deductible by the person who pays it (the payor). In contrast, alimony payments are taxable to the recipient and tax-deductible by the payor. That means it's often to the payor's advantage to pay more alimony and less child support, even if the total monthly payment is the same.

However, for you, it will not be more beneficial -- you'll have to pay taxes on the "extra" alimony, while you wouldn't have had to pay taxes on that money if it qualified as child support. Think of it this way: Decreasing your ex-husband's tax burden might actually increase yours, so run some numbers with an experienced divorce attorney or accountant before you agree to this. (Note: If you receive any partial payments that constitute both child support and alimony, IRS rules allocate the money first to child support and then to alimony.)

Additionally, even if you and your ex agree to structure his payments to minimize his tax burden, child support payments are often set by state-imposed guidelines and formulas, which are less flexible than they were in the past. This means it's more difficult to adjust the numbers up and down to meet your or your ex's tax needs.

For instance, California uses a complicated mathematical formula (which you can find in California Family Code ยง 4055) to determine the required amount of child support. However, a court can enter a child support order that deviates from this amount if there's a good reason.

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