Tax Brake with Robert G. Nath, Esq.

The tax laws state, as a general rule, that a payment is a “payment to support children” if the terms of the divorce or separation agreement “fix” the payment as one for the “support of children” of the payor spouse. To “fix” means to specify by an amount of money. Note that the payments must be fixed, not the total amount of payments. An example would be an instrument that required payment of $400 per month for educational expenses.

Also, the payment still qualifies as child support even if the payment is reduced on the happening of a contingency relating to the child. By this the law means attaining a specified age, marriage, death, leaving school, or “similar contingency.”

When you are drafting divorce or separation agreements, therefore, it is important to expressly denominate a payment as being for child support. This can be true even if there is no legal obligation to support the child, such as when the child reaches legal maturity.

Precision in these clauses can avoid litigation and difficulties under the tax definitions. Remember that there are 50 jurisdictions with divorce laws, but only one with a tax law. So the state-law meanings of these terms, while very important, must also be matched against the federal. The two are not always the same, and it's of course the federal requirements that control the tax results.

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