In most cases, child support and spousal maintenance are two separate entities, granted to a spouse during a divorce. However, there are certain occasions where they may be granted as one payment. This most often occurs when one spouse has a significantly lower tax bracket than the other, but it can happen more often, depending on the specific facts of your case. Your divorce lawyer can help you determine which option is best for you.
How It Works
Unallocated support is the term used when the same person pays both child support and spousal maintenance, leading to one lump sum paid instead of two clearly separate amounts. This is not something that a court will typically order, however, it will generally abide by this method if both spouses have agreed to this type of arrangement.
If you and your spouse do agree to handle support in this manner, the obligor (the paying spouse) will simply pay one lump sum to the obligee (the receiving spouse) for both child support and maintenance. As one might assume, this method is usually only successful if you and your soon-to-be-ex-spouse have a civil relationship. If there is too much acrimony between the two of you, it can become too easy to get bogged down in the “scoring points” mindset against each other.
As your divorce lawyer can explain, child support has never been tax deductible for either the spouse receiving the support or the spouse paying it.
Historically, spousal support was deductible by the payer and taxable to the payee. However, beginning January 1, 2019, spousal support was no longer a deduction for the spouse who has been ordered to pay and is no longer included as income for the spouse receiving the support. This applies to all divorce or separation agreements entered into after December 31, 2018.
For those agreements prior to that date, the paying spouse can still take the spousal support as a tax deduction. Therefore, the blended amount of the unallocated support amount is a tax deduction. If the support payments were separate, like the majority of issued support orders, only the spousal support would be a tax deduction. By having the payment amounts combined into one payment amount, the paying spouse enjoys a larger tax deduction benefit on their taxes.
Again, this does not apply to divorce or separation agreements that were entered into once the calendar page began on January 1, 2019.
Seek Experienced Legal Assistance
Regardless of how support is allocated, the important thing is that everyone receives their fair due. If you think unallocated support may be a method that would work in your divorce, your divorce lawyer can evaluate your situation and determine which method would benefit you the most.