In recent years, the growing number of divorces has also lead to an increase in the number of laws and regulations around how spouses paying and receiving spousal and child support must account for the monies paid or received. As the April 15 tax deadline approaches, it's important that couples who are officially divorced or separated know how to account for both alimony and child support on their taxes.
One of the most important things to keep in mind is that everything must be official. This means you need to have a court ordered official divorce decree or written separation agreement mandating that alimony and/or spousal payments of a specific amount be paid.
Under the current tax code, spousal support or alimony payments are deductible for the payer and considered as taxable income for the recipient. This same rule, however, does not apply to child support which is considered neutral and cannot be deducted or counted as income by either party.
Another important distinction is how child support and alimony payments are categorized and taxed. Monies received as child support do not count as alimony and are therefore not considered deductible for the paying party or as taxed as income for the receiving party. Also, provided both alimony and child support payments are mandated, in an effort to prevent a spouse from falling behind in child support payments, the IRS always considers payments made first as child support.
These are just a few of the complexities related to how child support and alimony are taxed. It is wise for individuals who are officially divorced or separated to consult a family law attorney who can provide more information and clarity related to these and other specific tax-related questions.
Source: Forbes, "Taxes From A to Z: A is For Alimony," Kelly Phillips Erb, Mar. 3, 2012