Taxing decision: Alimony or support?
Posted on Mar 25,2007 .
Taxing decision: Alimony or child support?
Q. My husband and I recently separated. We've got four kids, ranging in ages from three to fourteen. I earn about $50,000 and he makes $75,000. He's not asking for physical custody of the kids.
Our lawyers came to a number for child support. But my husband wants to pay me that money as unallocated alimony and child support.
Should I go along with that?
A. If your husband pays child support, then he cannot deduct the money from his tax returns and you get to keep 100% of the money, as it's not taxable income to you. Typically you would each claim two of the four kids as exemptions on your respective tax returns; and you'd pay taxes at the head-of-household rate. But support payments stop when the kids become emancipated. At that point, it'll be hard for you to convince a judge to order your then-ex-husband to start paying you alimony.
On the other hand, if he pays unallocated alimony and child support, then you must report that as income and pay income taxes on that money. And your husband will be able to deduct that money from his taxes. In that event, you'd claim all four kids as exemptions; and you should get your husband to also pay you half his tax savings as extra alimony which will help with your extra taxes.Then, when the kids become emancipated, it will be hard for him to convince a judge to stop or reduce the alimony.
The downside is that alimony will stop if you remarry. But if you remarry while the kids are still in need of support, you can get the court to order your ex-husband to pay child support.