Unallocated Spousal Support Lawyers Serving Clients In DuPage County

When negotiating a divorce settlement, there are many intricate issues that must be considered in order to ensure the best possible resolution. One such issue is the tax consequences of alimony/maintenance and child support payments. In some cases, combining both payments into one "unallocated support" payment can have significant tax advantages.

At The Stogsdill Law Firm, P.C., our attorneys are well-versed in the tax advantages and disadvantages a divorce may cause. We work closely with our clients to obtain the best possible settlement for your financial future. If necessary, we will provide aggressive representation for your family matter in the courtroom.

NOTE: Due to recent changes to U.S. tax laws, both alimony and child support will not be tax-deductible for the payor or taxable for the recipient for divorces finalized after December 31, 2018. Divorcing spouses who wish to take advantage of the benefits provided by unallocated support must complete their divorce prior to this date.

Understanding Unallocated Support In Wheaton, Illinois

The Internal Revenue Service (IRS) classifies alimony, also known as maintenance in Illinois, and child support payments differently when filing income taxes. Under the Internal Revenue Code, alimony is tax-deductible for the paying spouse, but it is taxed as income for the receiving spouse. Conversely, child support payments are not tax-deductible for the paying spouse, and they are not taxed as income on the receiving spouse.

To use the tax code to the advantage of both spouses, alimony and child support payments can be combined into a single payment of unallocated support. When this is done, the paying spouse can choose to treat the entire amount as alimony and deduct it from his or her income. Doing this, however, could force the receiving spouse to pay taxes on the entire amount of unallocated support. Depending on the financial circumstances of both parties, this might actually be a beneficial arrangement.

Unallocated Support Strategy In DuPage County

While it may seem like unallocated support only benefits the paying spouse, it can be mutually beneficial because of how income can be shifted from a higher tax bracket to a lower tax bracket. It is essential, however, to have an attorney who is knowledgeable about tax consequences of support payments and IRS guidelines in this regard. A skilled attorney can use unallocated support as a tool to negotiate a favorable settlement for his or her client. It should be noted, however, that classifying both support payments as unallocated support can only be done with the consent of both parties.

If you think unallocated support might be beneficial to your divorce settlement, contact us at 630-462-9500. We will discuss the circumstances of your divorce, and whether using unallocated support could benefit your family's financial future. We are located in Wheaton, Illinois, and we work with clients throughout northern Illinois, including DuPage County and the surrounding areas.