People in California who are recently divorced may have concerns about tax issues because single people and married couples are treated differently by tax law. In addition, certain aspects of property division after divorce can have tax consequences for one or both parties. This is particularly true of child support.
It is important to make a distinction between the types of payments former spouses may make to each other after a divorce. Alimony, for example, is a tax deduction for the person paying it while the person receiving it must report spousal support as taxable income.
Not so for child support. The law understands the cost of raising a child and does not require the custodial parent to pay taxes on child support. The non-custodial parent, on the other hand, cannot claim child support payments as a tax deduction.
Divorced couples must take these things in mind so that there is no overpayment or underpayment on their tax return. An underpayment can be particularly costly if the return is audited and interest and penalties are added to one’s tax liability.
Unfortunately, and contrary to what some people might think, the lawyer’s fees and court costs that result from a divorce cannot be deducted from one’s taxable income. There is, however, a silver lining: The cost of getting professional advice on taxation issues may be tax-deductible. Individuals should consult with their tax professional to find out if the cost of the professional’s assistance qualifies as a deduction.
Individuals who are confused about post-divorce tax issues, including child support, may find consulting with an experienced attorney to be a good idea. The attorney may be able to review the divorce agreement and offer insight on the client’s tax liabilities.