The end of a marriage can be a challenge for any individual, but when large sums of money are also at stake, the challenges can be greater. When settling a high\-asset divorce, it can potentially be important to understand how the support payments can affect your income at tax time. In Colorado, people who have informed themselves about how taxes will affect support payments may find themselves less stressed in their daily lives.
There are two types of support payments -- alimony and child support. Alimony payments are treated as taxable income for the individual who receives them. The person paying alimony payments will also be able to deduct the sum from his or her gross income when paying taxes. Therefore, the ratio of child support to alimony payments is financially significant.
Child support payments are not counted as income for the individual who receives them. Also, these payments are not deductible. A person negotiating the terms of a divorce will likely want to understand this distinction, as it may affect the amount of cash flow available to them. Other considerations are insurance premiums, college tuition, the age of the children, the length of the marriage and defending against attempts to reduce payouts in the future.
An individual facing a high-asset divorce will have many legal and financial details to consider, due to the presence of significant assets and property. This may also make the tax considerations a bit trickier. In Colorado, attorneys are available to assist individuals through the process of the divorce.
Source: montereyherald.com, "Barry Dolowich, Tax Tips: Alimony vs. child support", Barry Dolowich, Oct. 19, 2017