Child Support & Alimony
To reduce tax liabilities, divorcing couples may want to consider reclassifying child support payments as alimony. Child support is excluded from the recipient's taxable income, and the payer cannot deduct it. Conversely, alimony is included in the recipient's taxable income, and it's an above-the-line deduction for the payer.
If the alimony or support payer is in a higher tax bracket than the recipient, both parties might be able to save some money if they "split the difference" and reclassify all, or part, of the amount paid as alimony rather than child support. Special rules apply in determining the alimony deduction.