Divorce Settlement Tip #4: Alimony V. Child Support
Our first divorce settlement tip recommended that when calculating spousal support, you start with available cash, or disposable (after-tax) income.
Tip #2 recommended working backward from need—and staying as close as possible to each party’s marital lifestyle.
Tip #3 was about putting dollar value settlements in the context of your client’s bottom (not top) line.
Today, we’re going to talk to you about tax evasion.
Well, no. Not really. That would be sort of illegal. But a clever divorce attorney does design his or her clients’ settlements to be mindful of the taxable and deductible nature of alimony, or spousal support, versus the non-taxable, non-deductible nature of child support.
It’s simple. Child support is non-taxable as income. It’s also non-deductible as an expense. Alimony is both taxable and deductible. So alimony provides the benefits. Clearly, you want to weight your settlement offers towards alimony—and provide a win-win for all concerned…especially the children.
Without getting into the policy behind this distinction in the U.S. Tax Code (beyond the scope of this blog post), we cansay this: you have significant room to maneuver.
There to help? Easy Soft’s Divorce Financials.
Our divorce software for attorneys processes everything in a flash. You simply type in a figure for child support, and another for alimony. Then, you tell the machine how many scenarios you’d like to see.
A second later, all of the options will be splayed out before you—complete with payment amounts, payment labels, and net disposable income for each party.
Easy, right? We told ya. And you don’t even have to pull an Al Capone.
To learn more about our family law software, call us at 800 905 7638.