The economic settlement accompanying a marriage dissolution may consist of one or both of the following: (1) the initial "property settlement," sometimes referred to as a "division" of property when only community property is involved; and (2) provisions for maintenance payments categorized as alimony, child support, or some combination thereof. The tax problems of property settlements have been analyzed previously by the author. They are considered here only to the extent necessary to distinguish property settlements paid in installments from periodic maintenance payments made for the support of a former spouse, or for children of the marriage, or both. The primary concerns of this article are the tax consequences of alimony and child support payments. Federal income tax law recognizes marriage as a status involving unique tax benefits and burdens. The following are examples of some of the benefits: (1) a wage-earning spouse is not taxed on the "imputed income" enjoyed from services rendered in the home by the other spouse or by children of the marriage; (2) parents may obtain exemption allowances for their children and certain deductions for expenses of dependents, including expenses for medical care and child care. On the other hand, payments to or for the support of a nonworking spouse or child are not deductible by the payor and are not income to the beneficiaries of such payments. Although this rule may not be a tax burden, it can certainly be considered to be the denial of a plausible tax benefit. Another potential tax burden of marriage was established by the Tax Reform Act of 1969 which applies four separate tax rate schedules in ascending order of severity to: (1) married individuals filing joint returns (and certain surviving spouses); (2) heads of households; (3) unmarried individuals (other than surviving spouses); and (4) married individuals filing separate returns (and estates and trusts). Whether or not these new rate schedules make marriage a tax benefit or burden depends on the taxable income of each spouse. The history and effect of these rate schedules have been examined elsewhere. The fourth category does not apply to unmarried individuals, and married taxpayers will not ordinarily use it because of its high rates. It is available in the case where one spouse, for whatever reason, refuses to sign a joint return with the other spouse. Briefly, considering only the first three categories, the aggregate tax for two individuals having equal incomes will be less if they are unmarried than if they marry. Where incomes are widely disparate, or where one spouse has no income and the other spouse has considerable income, marriage will usually cause the aggregate taxes of the two individuals to be reduced. However, marriage has the general effect of increasing aggregate taxable income of two individuals by forcing them to share one standard deduction and by otherwise limiting their deductions.
Roland L. Hjorth,
Tax Consequences of Post-Dissolution Support Payment Arrangements,
51 Wash. L. Rev.
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