While every divorce is as different as every marriage, one thing is for sure—when getting divorced, you will be taking a deep dive into your marital finances.
In addition to valuing assets and debts, determining the value of property and retirement benefits, you will also learn if one spouse will be entitled to financial support.
Whether you will be the party receiving or paying support, you should understand the different legal constructs between the most common types of support.
What is Alimony?
Alimony, also referred to as spousal support, is a payment awarded to one spouse to maintain a similar lifestyle to the one they were accustomed to during the marriage.
This form of support is not automatically granted, and a judge will determine if payments are to be made for a specified period or until the receiving spouse remarries.
A judge will consider various factors when determining spousal support, such as the length of the marriage, the division of assets, personal living expenses, each spouse’s employment status, and possibly the reasons leading to divorce.
Tax Treatment of Spousal Support
In the past, alimony payments were considered tax deductible if specific criteria were met. However, according to The Tax Cuts and Jobs Act, the party receiving alimony due to a divorce finalized after January 1, 2019, no longer has to claim the alimony as income.
What is Child Support?
The primary difference between alimony and child support is the intended use of the payments.
Similar to how spousal support is used to benefit a spouse, child support is paid for the benefit of any children resulting from the marriage. Child support is used to meet the basic needs, such as housing, food, clothing, and medical expenses of a child.
What Determines Child Support Payments?
Many factors are considered when determining child support. The court will decide whether parents will share custody or if a child will reside primarily with one parent. The parent that the child lives with for the greater part of the year is considered the custodial parent and typically will be awarded child support.
While child support is neither tax deductible nor taxable income, the custodial parent can claim the child as a dependent, assuming the rules for claiming dependents are met.
Both parties need to understand the differences between alimony and child support. If you’re unsure if your obligations are being met, contact our office today to discuss your case. We can help advise you on the best course of action to request or pay spousal or child support.