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3 Feb. 2014

Family Support: A Way To Harvest Tax Advantages

Posted By The Buncher Law Corporation

UK tax return 2013In family law cases, the court can order that child or spousal support be paid. While necessary, these orders can wreak havoc on a family's finances. And in divorce actions, there is hardly ever enough money to go around.

The rule of thumb is this: child support is not tax deductible for the payor, but spousal support is. This can provide a significant tax advantage to the payor, and the spouse receiving payment must declare it as income. The tax benefits and burdens of these orders can affect families in many different ways.

A "family support" order combines child support and spousal support and allows the payor-spouse to claim the entire amount as a tax deduction. On the flip-side, the spouse receiving payment must declare the entire amount as income for tax purposes. While family support does not make sense in every case, it can provide a useful alternative when the goal is to maximize the tax benefit.

Section 4066 of California's Family Code gives the court discretion to order family support. Family support, as long as it is appropriately defined in a court order or stipulation, is deductible in California, but clients are advised to seek counsel as to federal tax deductibility.

Family support orders should be evaluated by experienced counsel. Sven Buncher, Senior Partner at The Buncher Law Corporation is available for a free consultation, and he can be contacted at sbuncher@tblclaw.com.

Categories: Family Law
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