After a divorce, it's common for one spouse to make payments to the other as part of the divorce agreement. These payments can be alimony, child support or a mix of both. It's important to understand the difference between the two because this can help you put together an agreement that leaves both of you in better shape financially.
What is alimony?
Alimony, also known as spousal support, consists of payments that one spouse makes to the other person after their divorce is final to maintain the same standard of living after the divorce. A divorce agreement usually involves alimony when one person makes more than the other; the higher earning spouse pays out alimony. As of 2019, the person paying alimony is typically unable to claim the alimony as a tax deduction, while the person receiving alimony generally is not required to report the payments as taxable income.
What is child support?
Considered separately, child support is payment to help raise young children. The custodial parent who is set to spend more time with the kids generally receives child support because they will spend more money on childcare. These payments typically end when the children reach a certain age, usually 18 or 21. Unlike alimony, there is no tax deduction for child support. The person receiving child support also does not need to pay income tax for receiving this money.
Alimony and child support are common components of preparing to financially separate from a spouse. It is important to understand what each is and how they differ. Regardless of your situation, we recommend that you seek the advice of your personal financial advisor or lawyer. Only they can provide specific advice on what solutions might best suit your needs.
