What is “family support” and how can this help to actually allow both parties to keep more money each month after a divorce? In many Carlsbad divorce cases, the final decree includes orders for child support and spousal support. One must consider the effect of taxation upon these payments.
Child support is not deductable for the person who pays it, and is not considered taxable income to the party who receives it. Spousal support, however, is taxable to the recipient and provides a tax deduction to the person who pays it. What if there were a way to combine these payments so that the recipient actually got to keep more money after tax, and the payor had to pay less money once tax deductions are considered into the equation?
The two support payments, spousal and child, may be combined into one payment known as “family support.” Family support may be fully deducted by the person who pays it, but must be declared as taxable income for the recipient. How is this helpful to the person receiving family support?
These determinations are highly fact specific, and often apply when the party paying the support is a high wage earner, and the party receiving the support has a lower threshold of income. In effect the tax benefit allows the payor to pay a higher amount of combined support, increasing the amount of money coming to the recipient. Once taxes are deducted, the recipient still has more net money than if the payments for spousal and child support had been handled separately.
This is another example of the benefit our seasoned and highly experienced Carlsbad based divorce attorneys bring our clients. We invite you to review the recommendations of our clients. They value our insight, expertise, responsiveness and effectiveness. If you are involved in a complex divorce involving a high wage earner, business ownership or large assets we invite you to contact us or call 760-434-3330 to schedule an appointment.