Maintenance payments tax treatment

[Introuble83]

I am close to reaching settlement terms of my divorce . In short I will be paying the full mortgage on the family home for the next 14 years and paying an additional 500 cash per month . After the 14 years the equity will be shared 50/50. The property was purchased by me solely pre marriage . My query is can the mortgage payments be classified as maintenance not specified as child maintenance. Maintenance payments for children are not tax deductible but payments which relate to the spouse are. In this instance the 15k yearly mortgage payments would be tax deductible for me and treated as taxable income for her . I cannot get any clarification around this .

 

[ClubMan]

If the mortgage payments are legally enforceable maintenance payments under the divorce agreement then you should be able to claim tax relief on them.

Legally enforceable maintenance payments

This section explains the tax treatment of legally enforceable maintenance payments

www.revenue.ie

You may be legally required to regularly pay an amount on behalf of your former partner, such as a mortgage payment. This is treated as a legally enforceable maintenance payment to your former partner.

Tax treatment of legally enforceable maintenance payments​

...

You can claim tax relief on the amount you have paid for the benefit of your former partner.

However I don't know if the fact that you stand to benefit from half the property down the road impacts this. I don't think that it does but I am not a tax expert.

While your solicitor is unlikely to be a tax expert either, have they been able to offer any opinion on this?

 

[Introuble83]

If the mortgage payments are legally enforceable maintenance payments under the divorce agreement then you should be able to claim tax relief on them.

Legally enforceable maintenance payments

This section explains the tax treatment of legally enforceable maintenance payments

www.revenue.ie

However I don't know if the fact that you stand to benefit from half the property down the road impacts this.

While your solicitor is unlikely to be a tax expert have they been able to offer any opinion on this?

They were very hesitant to provide any advice on this and recommended I speak to a tax consultant

 

[ClubMan]

Ok, so the key question is whether or not the fact that you effectively maintain an interest in the property (insofar as if/when it is eventually sold further down the line the proceeds will be split 50:50 between you and your ex spouse) impacts your eligibility for tax relief on mortgage repayments in the meantime? (Or if that relief might be clawed back in some way perhaps?)

I can't seem to find anything conclusive on this question. And even ChatGPT advised "get advice from a tax expert".

You might also want to find out what the tax treatment will be if/when you get your 50% cut of the property sale down the line. E.g. might you be liable for CGT on your share given that it wasn't your PPR? Or might you get PPR relief because you were providing accommodation for your ex/and child(ren?)?

 

[Introuble83]

Ok, so the key question is whether or not the fact that you effectively maintain an interest in the property (insofar as if/when it is eventually sold further down the line the proceeds will be split 50:50 between you and your ex spouse) impacts your eligibility for tax relief on mortgage repayments in the meantime? (Or if that relief might be clawed back in some way perhaps?)

I can't seem to find anything conclusive on this question. And even ChatGPT advised "get advice from a tax expert".

You might also want to find out what the tax treatment will be if/when you get your 50% cut of the property sale down the line. E.g. might you be liable for CGT on your share given that it wasn't your PPR? Or might you get PPR relief because you were providing accommodation for your ex/and child(ren?)?

If I own no other property and receive no rental income from the family home for tax purposes would it still not be considered my PPR? Whilst it’s not my home address it’s not an investment property either

 

[ClubMan]

If I own no other property and receive no rental income from the family home for tax purposes would it still not be considered my PPR? Whilst it’s not my home address it’s not an investment property either

In the circumstances described it's simply not your PPR. Whether or not PPR CGT relief/exemption might apply on your share of the eventual sale proceeds is the question that I can't answer. There are some situations in which such PPR relief/exemption is allowed even when the property was not one's PPR. If nobody else here can address the tax questions you may well have to get independent professional tax advice.

 

[Introuble83]

if I receive a tax deduction for a legally enforced maintenance agreement my understanding is the value of what I receive will be treated as income on the opposite side . If the ex spouse is not working thus not paying tax does this affect my ability to obtain the credit ? I assume revenue contact the social welfare and deduct the equivalent value from any received welfare benefits

 

[ClubMan]

If the ex spouse is not working thus not paying tax does this affect my ability to obtain the credit ?

No. You just claim it if you're entitled to it. Your ex's situation with regard to income/tax is irrelevant in this context.

I assume revenue contact the social welfare and deduct the equivalent value from any received welfare benefits

It's up to your ex to deal with their own tax affairs unless you're still on joint assessment.

Year of separation, divorce or dissolution of civil partnership

This page outlines how your income is taxed in the year you separate, divorce or have your civil partnership dissolved

www.revenue.ie

Separation, divorce and income tax

A change in your personal circumstances following separation or divorce may have implications for how you are taxed. This page explains how income and maintenance is taxed after separation or divorce.

www.citizensinformation.ie

Some social welfare payments are not assessable for income tax.

Taxation of social welfare payments

Find out which social welfare payments are taxable, and which payments are not.

www.citizensinformation.ie

Payments made specifically for the maintenance of children are not taxable at the recipient end.