Personal and family law
From maintenance payment to co-parenting: 3 takeaways on family law
What if you forget to index the maintenance payment? Are maintenance payments tax deductible? And what about sharing property taxes when co-parenting? As experts in family law, law firm Nelissen Grade provides a well thought-out property law solution - including proper maintenance arrangements and tax optimisation. Read on for three takeaways in family law.
Takeaway 1. Starting in tax year 2023, co-parents are permitted to share the property tax
Parents of at least two children are eligible for a credit on property tax, the regional tax payable on real estate properties. This applies to property owners and tenants alike. To receive this tax credit, the children must be eligible for benefit and domiciled with you. The problem is that children can have only one domicile and therefore only one property tax credit applies. The same applies in a co-parenting arrangement.
Starting in tax year 2023, it will be possible to share the property tax credit with an ex-partner in a co-parenting situation. Domicile is with one parent, but the tax credit is divided according to the ratio in which the children stay with the two parents. However, it is important to note that you will not receive the credit automatically and time is running out to submit the first application! This needs to be done by 31 March. After that initial application, the credit remains in effect for subsequent years, as long as all conditions continue to be met.
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Takeaway 2. Have you forgotten to index maintenance payment? You can recover overdue indexation retrospectively for up to 5 years
After a divorce, children should be able to maintain a similar standard of living with both parents. That is why one parent may be required to make a monthly maintenance payment to the other. This amount can be agreed upon in a divorce by mutual consent agreement or imposed in the court ruling.
These maintenance payments are automatically indexed annually, but the recipient must explicitly request this. This can be done without any formalities, by email or letter. Did you forget to index the maintenance payment? If so, the law provides a five-year period to retrospectively index and recover overdue maintenance. If you go to the bailiff in February 2024, you can have all amounts claimed back to February 2019. However, you should note that automatic indexing applies only to child maintenance. For example, the automatic indexing does not apply if you receive personal maintenance money as an ex-partner.
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Takeaway 3. Paying alimony means gaining tax benefits twice
If you are obliged to pay maintenance after a divorce, a certain amount of your assets is transferred monthly to your ex-partner's. To offset that loss to some extent, the legislator has made that maintenance debt 80% tax deductible. That means your annual income is reduced by 80% of the maintenance debt. The possible result? A lower tax bracket and therefore less tax.
The parent receiving the maintenance money can also enjoy a tax benefit. The parent with dependent children has a higher tax-free allowance and is not taxed on the received maintenance payments. These are taxed in the name of the children. Therefore, a divorced couple can enjoy a tax benefit twice through this arrangement.
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