Determining the amount of child support is one of the complexities involved in divorce proceedings. If the court ordered you to make child support payments to your former spouse who has custody of your child or children, this could take a huge chunk out of your income.
So, you might be wondering: Is child support taxable or tax-deductible? The quick answer is: No.
What follows is everything you need to know about taxes and child support, how you report child support on taxes, and other frequently asked questions.
What Is Child Support?
Even after a marriage ends, a parent still has financial obligations to support their minor child/ren. To provide for the child’s needs, such as food, clothing, shelter, and education, the parent who does not have primary custody of the child has to make regular payments to the custodial parent. These payments are collectively known as child support.
Determining the amount of support
The court usually determines the amount of child support based on a standard formula, which will also consider each parent’s income levels during the divorce proceedings. Both parents will have to submit documents that prove how much they earn, but take note that the amount of child support includes more than the actual, current income.
For example, if one or both parents are unemployed or underemployed, the court can determine the parent’s earning potential, based on what he or she could be earning, considering among other things their skills and education. That’s why it’s not that simple to avoid child support payments by being unemployed or working a lower-paying job on purpose.
Is Child Support Tax Deductible or Taxable?
Child support payments are neither tax deductible nor taxable. They are considered “tax-neutral.”
By paying child support, you are pretty much still spending what you would spend on your child had you not gotten a divorce. The difference now is that you will be sending the money through someone else, your ex-spouse, rather than directly spending these expenses yourself. Because it is no different from any other personal expense, it is not tax-deductible.
When parents of minor children separate or file for divorce, the court will usually hold a temporary child custody hearing to determin...
On the other hand, if you are the custodial parent receiving child support, the tax implications are pretty much the same.
Can Parents Deduct Child Support Payments?
No, the IRS generally does not allow parents to deduct child support payments when filing taxes. An exception to this would be for your child’s medical expenses. Non-custodial parents may claim an itemized deduction for the medical expenses of their children, under certain conditions:
- The child must have lived with either parent for at least half the year;
- The child is related to you; and
- You and your former spouse must have paid for more than half of their living expenses during the tax year for which you are claiming the deduction.
A caveat to this, however, is that since it’s an itemized deduction, you will have to forgo the standard deduction when you file your taxes. Also take note that only medical expenses that are more than 7.5 percent of your adjusted gross income may be claimed as a deduction.
Do I Have to Report Child Support Payments as Income?
If you are the custodial spouse, you do not have to report child support payments as income. Is child support considered income? Taxable income only includes wages, salaries, tips, and other benefits someone may derive from employment or business. Child support is not income because it doesn’t come from your work or business. Rather, as the custodial parent, you are only receiving money that your former spouse would have spent on your child prior to the divorce.
Who reports alimony payments as taxable income?
According to the Internal Revenue Service (IRS), whether or not you have to report alimony payments as taxable income depends on the execution date of your divorce decree or legal separation:
- On or before December 31, 2018: The person receiving alimony should report it as taxable income, while the person paying alimony may file it as a deduction.
- After December 31, 2018: Alimony is neither taxable nor tax-deductible.
Take note that if you obtained your divorce decree on or before December 31, 2018, but later had it modified, such modification may include an express repeal of the deduction for alimony. In this scenario, then, it is treated as if you received the divorce after the cutoff date, and so alimony isn’t taxable to the recipient or deductible to the payer.
Does Your Ex Have to Claim the Money as Income?
In no situation does child support count as income. However, in the case of alimony, your former spouse may have to report it as income, depending on when you obtained your divorce decree, as discussed in the previous section.
Are Any Other Tax Benefits Available?
Even if you cannot claim child support payments as a tax deduction, you can still maximize other tax benefits. One of these is the Child Tax Credit, as long as you and your dependent child meet certain qualifications. The qualifications may vary by tax year, but these will typically include the child’s age and your relationship to them, as well as your income level.
Although not necessarily a monetary benefit, the Treasury Offset Program allows you to use your federal tax refund to pay for child support, in case you’re behind in payments, as long as you meet certain qualifications. You may get in touch with the Financial Management Service so that it can apply your tax refund to any outstanding debts you may have, including child support.
Frequently Asked Questions
Do you report child support on taxes or tax returns?
Since it is neither taxable nor tax-deductible, you do not need to indicate it anywhere on your tax return. Think of it as just another family expense. You wouldn’t report how much money you spent on gas to take your child on a camping trip or how much you paid for your child’s piano lessons.
If I pay child support, can I claim a child on taxes?
Even if you are the non-custodial parent, you may claim your child as a dependent, if the custodial parent fills out and provides you with a Form 8332, Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent, or something substantially similar.
How much do you have to owe in child support for them to take your tax refund?
This depends on whether the child receiving support also receives benefits from the state. The government may use your tax refunds if you owe:
- At least $150 if your child receives state benefits; or
- At least $500 if your child does not receive state benefits.
Whether you’re the paying parent or the custodial parent, it’s important to know the tax implications of child support. In general, child support does not count as taxable income nor does it count as a deductible expense. However, you may still avail of certain tax benefits to help reduce your financial burden.