Are you considering obtaining a California family support order in your divorce? Opting for a family support order may be in your best financial interest if you or your spouse are paying or receiving both child and spousal support.
What is a California Family Support Order?
A California family support order consists of child support and spousal support. In other words, a family support order combines child and spousal support into one payment. The court makes no distinction between the two payments. Further, the court will not issue a separate order for child or spousal support if they grant a family support order.
Calculating California Family Support Orders
The amount of family support a parent will receive or pay depends on the amount ordered for child and spousal support. California law requires courts to follow statewide guidelines when establishing support orders; however, both parents can always reach their own agreement. That said, when setting a family support order, the agreed upon amount must be more than the standard California guidelines.
One hundred percent of payments made under a California family support order are potentially deductible by the payee. Furthermore, payments made under this order are also reportable as taxable income by the recipient because they are unallocated awards of support. In other words, there is no designated amount of family support specifically attributable to child support.
In order for family support to be tax deductible, it must not be disguised as child support. Therefore, spouses cannot tie the payment of family support to any child-related event. For example, payment terminating when a child reaches the age of 18 would be considered child support.
Child support is tax-free income for the recipient for federal income tax purposes. Therefore, neither the receiving party nor the child is required to pay income taxes on the amount received. On the other hand, the party paying the support cannot deduct these child support payments on their tax returns. In other words, child support payments are not tax deductible by the payee under state or federal law.
Spousal support payments are tax deductible by the payee under state and federal law. Additionally, these payments are considered taxable income for the recipient.
Drawing Conclusions: Tax Benefits of Family Support vs. Child and Spousal Support
While the parent receiving family support must claim support payments as income, if their income is low, they may not necessarily have a negative impact on their end-of-year tax liability. Often, this tax break is enough incentive for the parties to negotiate a family support order instead of spousal and child support.
Further, since child support is not tax deductible, the paying parent may also benefit from paying a family support order because of the income tax benefits. Unlike child support, the paying parent may deduct the total amount of family support for income tax purposes. This break is highly beneficial for a spouse paying both spousal and child support. In fact, a paying spouse can save thousands of dollars in income tax by combining child and spousal support in a California family support order.
A People’s Choice Helps With Family Support Orders
A People’s Choice has been providing document preparation services for family law and other types of cases for over 40 years. Plus, we can create a California guideline report based on the income of both parties to predict child, spousal, and family support orders. This report will help you make an educated decision about how you will structure your California family support order.