Individuals must consider the tax consequences of obligations related to child support in divorce proceedings. The fact that child support payments are not deductible and the receipt of child support is not taxable sometimes creates spousal bitterness and discord in a divorce case. In this situation, the prevalent issue is the conflict between the payor’s desire to characterize his or her payment as an income tax deductible payment of alimony, while the payee-spouse wishes to treat the payment as a tax-free receipt of child support.
Payments that are specifically designated as child support or treated as specifically designated as child support under a divorce or separation instrument are not alimony, and are not includible in the recipient’s gross income. I.R.C. § 71(c) excludes from the definition of alimony cash payments which constitute child support.
A payment or portion of a payment is treated as “fixed” for child support if the divorce or separation instrument specifically designates an amount of money or a percentage of a payment for the child of the payor. I.R.C. § 71(c)(1). To insure no challenges are made by the IRS, the divorce decree should clearly and unambiguously “fix” the payment as child support. The presumption for an award is that it has not been “fixed” as a payment for child support if not specifically designated as child support.
The concept of a “fixed” payment does not refer a specific amount, but rather to a clearly determinable payment of child support. Thus the actual amount of a child support payment may vary from year to year without losing qualification as a child support payment. A payment may be treated as constituting child support even if the parent does not have a legal obligation under state law to support the child. I.R.C. § 71(c)
The bottom line: Payments made for child support are not deductible by the payor spouse and are not taxable income to either the payee spouse or to the child. If you have questions about any tax issue related to alimony or child support, call THE TAX EXPERTS AT THE Thorgood Law Firm www.thorgoodlaw.com. For a FREE consultation, call 212-490-0704.
