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What are the tax consequences of divorce?

A Californian spouse's divorce problems do not end with the entry of a decree. Child support and alimony have federal tax consequences, and spouses should plan for this while negotiating a settlement or pursuing litigation.

A spouse who pays spousal support may claim it as a deduction and lower their tax liability. However, the spouse must meet several requirements.

Spouses cannot live in the same residence. And, these payments cannot be used for child support. Alimony payments made after the remarriage or death of a former spouse are not deductible because these payments are not required.

A spouse receiving alimony must report these payments as income on their taxes. Their former spouse must have their Social Security Number, so they can claim this deduction on their taxes. The IRS may impose a $50.00 fine upon the spouse receiving alimony, if their former spouse does not have their Social Security Number, and it is not provided to them.

Child support payments have less impact on taxes. A parent paying support cannot deduct these payments from their taxes. Income must be reported normally, without being decreased by child support payments.

But, the parent paying this support may claim their child as a dependent, if they pay half of the child's financial support. The noncustodial parent may claim the child as a dependent, if the divorce, separation decree or a written declaration by the custodial parent states that the noncustodial parent can claim the child as a dependent.

When both parents claim the dependent, the return is filed first. The IRS also relies on other criteria. First, the parent who spends the most time with the child may claim the child as a dependent. Or, if a child spends equal time with each parent, the parent with the highest adjusted gross income may claim the dependent. If there is only one taxpayer, that parent may claim the child as a dependent.

A parent receiving child support does not report it as taxable income on their taxes. This support may not be considered as earned income to qualify the parent for the Earned Income Credit. Tax consequences are only one of the divorce legal issues. An attorney can help seek a reasonable resolution that accounts for potential consequences.

Source:, "Tax guide: Reporting alimony and child support," accessed on May 21, 2017

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