Paying or receiving child support payments carry a new set of tax implications. Keep the following in mind as tax day approaches, or discuss these changes with your legal representative:
In order to qualify, the child support payments must be designated as “child support” and not as “family support” or “family support.”
By having the money designated only as child support, you won’t have to claim child support as income on your tax return if you are the parent receiving child support payments.
If child support is included in your monthly spousal support, you will be required to declare the money as income, and you could end up with a higher tax bill.
However, if you are the parent who is responsible for paying child support, you cannot deduct it as an expense on your tax returns. Only spousal support and family support payments are deductible.
Child Support and Filing Taxes
Since child support is intended to be used for feeding, housing, and otherwise caring for minor children under 18, the IRS does not consider it taxable income. Since it isn’t considered income, you aren’t required to declare it on your tax returns each year.
Child Support and Exemptions
Your court-issued divorce decree will state which parent can claim your children as exemptions on your tax return each year. If you are the non-custodial parent, however, you do have the option of claiming your children as exemptions on your tax return if:
- You pay at least $600 per year in child support
- Your divorce decree states you can include the children on your returns as exemptions
- Your spouse gives you written authorization to claim the children as exemptions
- You fill out and attach IRS form 8332 to your tax return, proving you have met the criteria for including your children as dependents, even though you are the non-custodial parent.
It’s important to keep in mind that both you and your spouse can’t claim your children as exemptions at the same time. In doing so, the IRS will flag both of your returns. You could end paying fines and/or having any refunds seized. In other words, don’t do it. Running afoul of the IRS just isn’t worth it.
Divorce and separation bring about many changes in your tax scenario, so it’s important to understand these changes ahead of tax season. Even though the IRS doesn’t consider child support as income, there are tax implications for you both under certain circumstances.
Always raise any tax-related questions with either your legal representative or with a qualified tax pro. Having the correct information is especially important if this will be your first year of either paying or receiving child support.