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Does Receiving Alimony or Child Support Count as Income?

Divorcing spouses may wonder if receiving alimony or child support counts as income. The Tax Cuts and Jobs Act of 2017 changed federal laws for divorce and separation agreements dated January 1, 2019 and after. Since then, anyone receiving alimony payments does not have to report it as taxable income. The ex-spouse making the payments cannot claim a deduction for them, either. To qualify as alimony, the following rules apply:

  • Legally separated spouses must not be living in the same household.
  • Payments are made under a legal divorce or separation agreement by check, money order, or cash.
  • The former spouses are not filing joint tax returns.
  • The payments are not for child support or a property settlement.

New Jersey laws differ. If you are receiving qualifying alimony payments, they are taxable for the year received. Alimony is not subject to withholding tax, so you can make estimated tax payments or increase your withheld tax if you paid wages from an employer. People who make these payments in New Jersey can deduct it, but alimony can be considered non-taxable when a divorce decree specifies that the paying spouse does not have to claim it as a deduction.

Child support payments are separate from alimony and are not taxable. It should not be included in tax returns since it does not qualify as income. These payments are negotiated during divorce proceedings and finalized in the decree.

When a parent misses a child support payment, they are usually given penalties. Parents who fall behind their payment schedules can have income withheld, licenses suspended, and their tax refunds can be redirected to the receiving parent. More severe penalties include bench warrants and a seizure of assets. Child support can be modified for significant life changes, like a severe illness or job loss.

How Can I Reduce My Taxes During a Divorce?

You may reduce your tax burden during a divorce in a few ways. One is for the custodial parent to claim dependents on the return. Certain guidelines apply, such as the children living with the parent for at least 50 percent of the year. The parents must also be divorced or legally separated.

Another option is to examine the assets being split up during the divorce. Accepting something like valuable stock investments might seem advantageous, but that might increase your tax burden. The same applies to other assets that can be considered taxable income.

A Marlton Divorce Lawyer at Goldstein & Mignogna, P.A. Can Provide Legal Guidance

Planning for tax payments is vital for divorcing couples. To learn more, contact a Marlton divorce lawyer at Goldstein & Mignogna, P.A. Call 856-890-9400 or complete our online form to schedule a consultation. Located in Marlton, New Jersey, we serve clients in South Jersey, including Burlington County, Camden County, and Gloucester County.

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