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Are Child Support and Alimony Taxed in Illinois?

Posted on in Divorce

IL family lawyerOne of the things that potential divorcees worry about most is their financial future. Learning to live on one income, especially after many years of being married, can be very difficult. For parents of young children who gave up career opportunities to nurture a family, the prospect of managing personal finances after divorce can be all the more challenging.

Along those lines, one of the most common questions that Illinois family law attorneys answer is whether child support and alimony are taxed. After all, the impact of state and federal taxes on income can have a major impact on how much money a person actually receives. In this blog, we will review how child support and alimony are treated under federal tax law. We welcome you to call our experienced firm of divorce attorneys for a complete consultation focusing on your individual circumstances.

How Is Spousal Support Taxed?

Also known as “alimony” or “spousal maintenance,” spousal support is less common in Illinois divorces than it used to be. Generally, only couples who have been married for a long time, who have a significant difference in income, or who share minor children with one parent as a caregiver make or receive spousal support.

Spousal support payments that begin after January 1, 2019, are considered “tax neutral;” that is, the spouse making payments does so after state and federal taxes have already been taken out of their paycheck, and the payments are not tax-deductible. The spouse receiving payments does not pay state or federal taxes on them. If you are already making spousal support payments from a date earlier than January 1, 2019, and you are seeking a modification in your spousal support order, it is important to consult with an attorney to understand the tax implications of doing so.

How is Child Support Taxed?

Like spousal support, child support is also tax neutral. The parent making payments cannot claim them as tax-deductible and the parent receiving payments does not pay taxes on them.

However, there are other tax benefits available to parents, and these are an important part of the overall financial negotiation process. Minor children are tax dependents, but only one parent can claim the children on their taxes. This may result in a major tax benefit to the parent who claims the children, so it is important to decide this before the divorce is finalized. Parents should also decide who will receive the Child Care tax credit, if applicable.

Schedule a Confidential Consultation with a Hinsdale, IL Child Support Lawyer

Understanding state and federal law as they apply to child support and alimony payments is essential whether you are the parent who will be paying or receiving. If you anticipate getting divorced and are trying to plan for a healthy financial future, contact the experienced DuPage County divorce attorney with Botti Marinaccio, LTD.. We offer comprehensive consultations so you can meet our knowledgeable staff and learn more about how we could handle your case. Call us at 630-575-8585 today.

 

Sources:

https://www.irs.gov/faqs/interest-dividends-other-types-of-income/alimony-child-support-court-awards-damages/alimony-child-support-court-awards-damages-1

https://www.irs.gov/taxtopics/tc602

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Botti Marinaccio, LTD.

630-575-8585

2015 Spring Road, Oak Brook, IL 60523

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