It is important to know the difference in tax treatment whether you are making or are the recipient of support payments.
What Are Support Payments?
Support payments are financial support paid to by an individual to a former spouse or common-law partner based on a court order or written agreement to help with the cost of living. It is important to distinguish between child support and spousal support because the tax treatment of each one is different.
There are two types of support payments:
- Child support
- Spousal support
While child support is generally considered non-taxable and non-deductible, spousal support is fully taxable in the hands of the recipient and deductible in the hand of the payee. To claim support payments, there must be a court order or written agreement that specifies the amount and occurrence of the support payments.
The payment has to meet five conditions to be considered a support payment:
- The support payment has to be based on a court order or written agreement.
- The ex-spouse or common-law partner must be living at a different home address when the breakdown in the relationship happened or has to be the parent’s child.
- The support payment is made to help with the cost of living for the former spouse, the child or both. The former spouse can use the money as she/he sees fit.
- The support payments must be made regularly (most often monthly) and spelled out in the court order or written agreement.
- The support payments have to be made from the individual to the former spouse or common-law partner.
The Tax Treatment of Child Support
For court orders or written agreements that were made after April 1997, all child support payments are considered non-taxable, non-deductible.
The former spouse or common-law partner does not need to include child support amounts received when filing a tax return. The individual who is paying the child support cannot claim a tax deduction for child support payments made.
Prior to May 1997, child support was considered taxable to the former spouse or common-law partner, and the individual making the payments could claim a tax deduction. If a deductible/ taxable child support was written by a court-order prior to May 1997, then it was revisited in 2003 or after, the child support automatically becomes non-refundable non-taxable.
In court orders that do not distinguish between child and spousal support, the whole amount is considered non-taxable, non-deductible.
The Tax Treatment of Spousal Support
The tax treatment of spousal support is different than child support.
- Child support is considered non-taxable
- Spousal support (commonly referred to as alimony) is considered fully taxable in the hands of the recipient. And it is deductible from the income of the payee.
The former spouse or common-law partner must claim spousal support as taxable income if the court order or written agreements clearly spells out the amount to be paid on a recurring basis (often monthly) and there are no outstanding child support payments. In this case, the individual making the support payments can claim a tax deduction on the tax return for support payments made.
Claiming Support Payments in the tax return
Making the support payment:
If you are behind in your payments, you have to subtract all the non-deductible amount ordered by a court order first, then claim the remaining as a spousal amount regardless of which ones you actually paid first.
If you were ordered to pay $400 per month for child support and $200 per month for spousal support, then your total support for the year should be:
$400 x 12 + $200 x 12 = $4,800 + $2,400 = $7,200 total payments
You will report the total payment of $7,200 0n line 21999 for information purposes. And the spousal support payment 0n line 22000 to be deducted from your income.
If you were behind in your payments and paid $6,000 in total (regardless if they were actually paid for a child or a spouse), you will allocate the amounts for the child support first then you can claim a deduction for the rest:
Total payment of $6,000 should be reported on line 21999
Child support = $4,800
Spousal support = $6,000 – $4,800 = $1,200 to be reported in line 22000
You cannot report the full spousal amount of $2,400 if you are behind in your child support amount.
The recipient of the support should report the same child amount on line 12799, and the spousal support on line 12800 as income.
TurboTax products offer an easy step-by-step guide to help you report all the income received from any support payments or report the deductions if you are eligible for them. Consider TurboTax Live Assist & Review if you need further guidance, and get unlimited help and advice as you do your taxes, plus a final review before you file. Or, choose TurboTax Live Full Service* and have one of our tax experts do your return from start to finish.
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