Getting divorced often means disentangling numerous financial issues, such as the ownership of the marital home and the responsibility for paying off debts incurred during the marriage.
One of the biggest questions may center on whether one spouse will be entitled to alimony and/or child support.
If you're receiving support—or potentially paying it—it's important to understand the differences between alimony and child support and why those differences matter.
What Is Alimony?
Alimony, also known as spousal support, is an amount paid from one spouse to another following a divorce. A judge may order alimony payments for a specified period of time or until the spouse receiving support remarries.
Alimony is generally intended to help the spouse receiving it maintain a similar lifestyle to the one they were accustomed to during the marriage. Alimony is not granted automatically—the spouse needing the alimony has to ask for it.
Tax Treatment of Alimony Payments
How you treat alimony for tax purposes depends on whether you pay it or receive it and when your divorce was finalized.
If your divorce agreement was finalized prior to December 31, 2018 and you make alimony payments to your ex-spouse, those amounts are tax-deductible. That means you can deduct the alimony you've paid from your taxable income for the year, yielding a tax break.
On the other hand, if you're receiving alimony payments, you must claim them as taxable income on your return. Again, this only applies if your divorce agreement was finalized before December 31, 2018.
The Tax Cuts and Jobs Act eliminated the deduction for alimony payments and the requirement to claim alimony as taxable income for divorces finalized after December 31, 2018.
IRS Rules Regarding Alimony
The IRS has several requirements that must be met for spousal support payments to be considered alimony, and therefore, deductible for divorce agreements finalized before December 31, 2018.
To qualify as alimony, ex-spouses must meet these criteria:
- They cannot file a joint tax return.
- Payments must be made in cash, by check, or money order.
- Payments must be owed under a divorce or separation agreement.
- The divorce or separation agreement doesn't categorize the payments as not being alimony.
- Spouses must not live in the same household when payments are made.
- There's no liability to continue the payments if the receiving spouse dies.
- Payments aren't treated as child support or a property settlement.
If you're eligible to deduct alimony payments you made, you can do that on your Form 1040, using Schedule 1. You'll need to enter your former spouse's Social Security number or individual taxpayer identification number on the form. Otherwise, the IRS may disallow the deduction.
If you're receiving alimony and it's considered taxable income, you'd also report that on Form 1040, Schedule 1. And you too will need to include your former spouse's Social Security number or taxpayer identification number.
What Determines Alimony Payments?
Alimony isn't one-size-fits-all; the courts can use a number of factors to shape payment amounts, including:
- Each spouse's income and employment situation
- Their individual living expenses
- How assets were divided in the divorce
- The length of the marriage
- Each spouse's age
Alimony can be modified after the divorce in certain situations. For example, if the paying spouse loses their job they can ask the court to reduce the payment amount. And likewise, if the spouse receiving alimony sees their cost of living increase they can ask the court to order a higher support payment.
Alimony vs. Child Support
The key difference between alimony vs. child support is the intended use of each payment.
Alimony is paid for the benefit of a spouse; child support is paid for the benefit of any children resulting from the marriage.
Child support is designed to be used to meet the basics needs of the child. That includes things like food, clothing, medical care, housing, and other necessities.
Tax Treatment of Child Support
Because child support is intended to benefit the children, it's not considered taxable income for the person who receives it. Child support payment is also not deductible for the parent who provides it.
IRS Rules Regarding Child Support
As child support is neither tax-deductible or taxable income, there are no reporting requirements for making or receiving payments. Parents do, however, need to take care when claiming children as dependents on their taxes.
Generally, the parent that the child lives with for the greater part of the year is the custodial parent for tax purposes. This parent is able to claim the child as a dependent, assuming the rules for claiming dependents are met.
The non-custodial parent can, however, claim the child as a dependent if a separation agreement or divorce decree specifies that they can. The custodial parent has to sign Form 8332 authorizing the release of their right to claim the child as a dependent.
What Determines Child Support Payments?
Whether child support is court-ordered and in what amount largely depends on the finalized custody agreement and state law.
For example, some states may not order support if both parents earn similar incomes and share custody equally. Or, some states may base support on the number of children in the household and the non-custodial parent's income.
How long child support payments last also largely depends upon state law and each parent's financial situation.
For example, child support may be ordered until the child turns 18. Or, the paying parent may be required to continue providing financial support beyond that date in the form of college tuition assistance.
The Takeaway: Talk to an Attorney
If you're in doubt about the differences between alimony and child support, and your obligations regarding either one, a divorce attorney can be an invaluable source of information.
Even if you have yet to initiate divorce proceedings, an attorney can advise you on the best course of action to take with requesting or paying spousal or child support.