Divorce and income taxes in Wisconsin

We are all used to tax day being April 15. But this year, the federal tax day is April 18 because a Washington D.C. holiday will many keep government offices closed on April 15. Even with tax day delayed three days, many of our readers have questions about how divorce can affect their income taxes.

Divorce can have a tremendous effect on income taxes, and some of the most impactful items in a divorce may not be obvious to the untrained eye. Because of this, it is very important to work with an experienced family law attorney who can tailor divorce documents to your specific situation. However, there are some tax and divorce basics we would like to share with you.

In many of the divorces we handle, the issues of child support and alimony come up. Many divorcing spouses understand that child support is a payment from one spouse to the other meant to pay for the costs of raising a child. Similarly, alimony is payment from one spouse to the other to help the receiving spouse maintain his or her standard of living after the divorce. In some people’s minds, this might make alimony and child support relatively interchangeable.

Nothing could be further from the truth, especially from a tax perspective. This is because of the way the tax code treats alimony and child support. Child support is considered tax neutral. This means that the spouse who pays child support cannot take the amount paid for child support as a deduction. On the other side of that coin, the spouse receiving child support will generally not be required to pay income taxes on it.

Alimony is different. If certain conditions are met, alimony is deductible for the spouse who pays and the spouse who receives will generally pay taxes on it. In a high assets divorce, the difference between child support and alimony could amount to thousands of dollars at tax time.

Source: Time Magazine, “Divorce and Taxes: Five Things You Need to Know,” Kelly Phillips Erb, 4/6/2011