Do I Have to Pay Taxes on Alimony and Child Support in Wisconsin?

 Posted on June 20, 2024 in Family Law

Most people are familiar with the concepts of child support and spousal maintenance, also known as alimony. Together, they are referred to as family maintenance. Family maintenance is used to provide financial support to children and spouses who go through a divorce. Couples who file for divorce often expect that one of them will be ordered to pay alimony, and one or both parents will be ordered to pay child support.

Not many people, however, are aware of the tax implications of alimony and child support. Hiring a Wisconsin divorce attorney is a great way to stay informed about your divorce and its tax considerations. This includes learning the answers to such questions as:

• Does the payee — the spouse who receives family maintenance — have to pay taxes on the money?

• Does the payor — the spouse who pays the family maintenance — get to deduct taxes from the payments?

• How does divorce affect taxes?

Do I Have to Pay Taxes on Child Support?

According to federal law, child support is tax-neutral. This means that the payee does not need to pay taxes on the money, and the payor cannot deduct the payments from his or her taxable income. However, this is not always the case. Child support that was ordered before January 1, 2019, is not tax neutral. If someone is receiving child support payments based on an order that was issued before that date, he or she must pay taxes on those funds. This also means that the payments are tax-deductible for the payor.

Do I Have to Pay Taxes on Alimony?

Alimony is similar to child support in terms of its tax considerations. If alimony was ordered before 2019, the payments are tax-deductible for the payor and taxable for the payee.

Are There Other Tax Implications for Divorce?

One of the major ways your divorce might affect your taxes depends on whether or not you can claim your child as a dependent. Only one parent is allowed to claim the child as a dependent on his or her tax returns. This is usually the parent who has the majority of physical custody of the child, or what the State of Wisconsin refers to as “placement.” It is the same thing with child tax credits: the parent with the majority of placement — called the custodial parent — can claim the tax credit. However, the IRS does allow the custodial parent to sign over the right to these tax benefits to the noncustodial parent.

Contact a Waukesha County, WI Divorce Lawyer

Every situation is different, and tax considerations can be complex depending on your divorce and personal circumstances. Hire a Muskego, WI divorce attorney to stay in the know about your tax obligations and benefits. Many people choose Bucher, Wolff & Sonderhouse, LLP to handle their divorces because of our excellent and knowledgeable attorneys. We will not only guide you through your divorce but we will also connect you with skilled tax attorneys as necessary. Call 262-232-6699 for a free consultation today.