Many divorcing spouses in Connecticut or clients seeking a legal separation whether in the New Haven Court, Hartford Court, New Britain or Tolland, or any other Connecticut Court, ask a variety of tax-related divorce questions. Is Alimony and Child Support taxable?
Child Support is not taxable to neither parent. The parent who pays child support cannot claim the amount as a deduction. The parent receiving the child support cannot claim the amount as taxable income. Connecticut Child Support Guideline is determined on the net income of the parents. This means that after the parent's gross income, deducting Federal Taxes, State Tates, Social Security and other taxes and mandatory expenses such as medical and dental insurance premiums, mandatory retirement contributions, the net is determined and the child support is calculated based on the net income of the parents. In our divorce practice, we use, as most Family Law Courts currently use, the Family Law Software. The attorneys/mediators project the correct filing tax status after the divorce, single or head of household, and how many children can each parent also claim on his/her tax return. Also, the mortgage interest and taxes on the marital home are taken into account when calculating future tax liabilities as the mortgage interest and taxes are deductible to the parent retaining the home. Irrespective of your residence, Branford, New Haven, Glastonbury, Avon, West Hartford or Guilford, the taxes on your marital home vary greatly, hence, using tax assumptions after the date of dissolution, changes the bottom line on Child Support.
As a reminder, if a parent pays (both) alimony and child support, the payments are first applied to satisfy child support obligations and then to alimony. In other words, child support obligations must be 100% met before any amount of alimony can be considered as a tax deduction by the parent paying the amount.
In simple terms, alimony is taxable income to the recipient of alimony and deductible by the person paying alimony. To qualify as alimony under IRC Section 71(b) the payments must meet the following requirements:
•Payments are required under a written divorce or separation agreement and must be clearly specified as such in a Connecticut divorce decree;
•The payment cannot be designated as “not alimony” or as property division or as some other form of payment or credit, or payment to maintain the payer's real estate or property;
•Spouses may not be members of the same household;
•Payments may not be treated as child support, as child support is paid after taxes, or on the net;
•Payments of alimony cease upon death of either payor or payee;
•The parties cannot file joint tax returns.