Child Support & Alimony

Divorcing couples may want to consider reclassifying child support payments as alimony until the end of 2018. Child support is excluded from the recipient's taxable income and the payer cannot deduct it. Alimony through 2018, on the other hand, is included as income on the recipient's tax return, and it is an above-the-line-deduction for the payer. By splitting the difference, both parties could save money.

Under the Tax Cuts and Jobs Act of 2017, however this changes. The new law eliminates deductions for alimony payments required by divorce agreements executed after December 31, 2018. Recipients of affected alimony payments will no longer have to include them in taxable income.