What's The Difference Between Alimony And Child Support?

During the negotiations of a divorce settlement, a couple may find that they have some flexibility in the way money is allocated. So the question becomes how much should be allotted for spousal support and how much for child support. Before making this decision, each person should take a few things into account.

The first consideration is Uncle Sam. Spousal support, or alimony, is considered income for tax purposes. The recipients should claim it as such and the payers can count it as a deduction on their tax return. So at the end of the day, the recipient will see 100% of the child support while only seeing 65% of the alimony (assuming a tax rate of 35%). A woman receiving $1,500 in alimony and $1,500 in child support will take home $2,475 per month. If she received $2,000 in alimony and $1,000 in child support, she would only take home $2,300.

Before going far left and saying "make it all child support," remember that child support will end when your child reaches a certain age. Also note that because alimony is considered to be earned, it can be contributed to an IRA. Child support cannot. As you sit down to crunch the numbers, talk to your divorce attorney. Create a formula that will work for you in the present as well as the future.

Categories: Child Support