There are a number of benefits in Family Law that can be agreed upon in a divorce agreement or be established in the judgment handed down by the relevant judicial authority. In addition to the content, we must take into account the taxation impact of such benefits.
Some of the benefits are:
The spouse most economically weakened as a result of the break up shall be entitled to request alimony, which may not exceed the living cost enjoyed during marriage or that of the spouse obliged to pay.
It is worth noting that spousal maintenance is taxable. It will be taxed as employment income for the spouse entitled to it and deducted from the payer´s taxable income.
Generally speaking, it will be more advantageous for both parties in terms of taxation that alimony be paid and received in instalments and deferred payments. There are grounds for that, otherwise the beneficiary would receive a disproportionate increase in income and the payer would not be able to deduct the whole amount as tax base would be lower and the excess may not be deducted on subsequent years.
Child support consists of what is necessary for maintenance, housing, clothing and medical assistance and education for the children in common.
Child support is not subject to taxation.
It is worth noting that education, medical expenses, summer camps, etc. are included in child support and therefore do not reduce the payer´s tax base nor is it taxed to the beneficiary.
Alimony on account of employment
In the event that a spouse has worked for the household substantially more than the other or has worked for them without compensation or with insufficient compensation, they are entitled to financial compensation for such dedication as long as the other spouse has obtained an equity increase.
Taxation of such compensation has been changing in recent years. The tax reform of 1 January 2015 sets forth that such compensation does not entitle to reduce the payer´s tax base nor is it taxed to the beneficiary.