If you are planning to divorce your spouse, you may have some uncertainty about your financial future. While Connecticut law entitles you to an equitable share of marital assets, you may be eligible for alimony. If you have children, you may also be able to pursue child support.
Following your divorce, you may file federal tax returns as a single person for the first time in years. Consequently, you should know how alimony and child support may affect your federal tax bill.
Alimony and tax liability
Alimony, also called spousal support, usually qualifies as income for federal tax purposes. Therefore, you probably must pay taxes on the alimony you receive. Nevertheless, you must be sure the payments your ex-spouse makes to you constitute alimony under the tax code.
If each of the following applies to the payments you receive, they are probably alimony:
- The payments stem from a divorce decree.
- The payments do not involve the division of marital assets.
- You and your ex-spouse do not live in the same household.
- You and your ex-spouse do not file a joint tax return.
Child support and tax liability
Child support includes the payments your ex-spouse sends you to provide for the financial needs of your children. For federal tax purposes, child support is different than alimony.
In Connecticut, judges calculate child support based on each parent’s net income. Accordingly, the paying spouse has already likely paid federal, state and local taxes on the income. For tax purposes, the parent who receives child support may not treat payments as income. The paying parent also cannot typically use child support as a taxable income offset.
Understanding alimony, child support and your tax bill is an essential part of planning for your financial future. Still, both divorce law and tax law can be incredibly complex. Because your post-divorce tax obligations are likely to vary considerably from your married returns, you may need the assistance of a tax professional to understand your federal tax liability.