Child Support is tax neutral, which means that if you are paying Child Support, you cannot deduct these payments from your income and if you are receiving Child Support, you need not include these payments as income on your return. Spousal Support is just the opposite: if you are paying Spousal Support, you can deduct the periodic Spousal Support that you pay on your Income Tax Return and if you are receiving Spousal Support, you must report these payments as income on your Income Tax Return. This only applies to Spousal Support paid pursuant to a Separation Agreement or Court Order, which is one of the many reasons why it is important to ensure that any agreement that you reach is properly drafted.
Periodic Spousal Support Can Impact Your Income Tax Return
The difference between Child Support and Spousal Support is not the only important difference when it comes to filing your Income Tax Return. Another important distinction is the difference between periodic, or monthly, Spousal Support payments and a lump sum, or one-time, payment of Spousal Support. Periodic Spousal Support payments affect your income when you file your Income Tax Return. If you are making, or receiving, a lump sum payment, then this may not apply to you.
Another important distinction is between ongoing lump sum Spousal Support payments, and retroactive ones. Retroactive lump sum payments are one-time payments made to account for support that should have been paid, but wasn’t. In other words, retroactive payments allow a payor to catch up on payments that should have been made in the past. Lump sum retroactive payments can have the same income tax implications as periodic, or monthly, Spousal Support payments.
Legal Fees Can Also Impact Your Income Tax And Support
Another key issue when it comes to Income Tax and Support are your legal fees. You can deduct legal fees that you spend on obtaining periodic Child Support or periodic Spousal Support. The important distinctions to note here are that you can only deduct legal fees spent to obtain periodic Child Support or Spousal Support payments. This means that you cannot deduct legal fees spent to obtain lump sum payments. Also, you can only deduct legal fees spent to obtain Child Support or Spousal Support payments. This means that you can only deduct these legal fees if you are the recipient of Child Support or Spousal Support; this does not apply to support payors.