How Does Child Support Affect My Taxes?

Providing for your child after a separation changes when one parent has primary custody. Instead of paying for the costs of raising your child together, one parent generally gets support payments. Child custody can change your deductions and tax credits. However, child support payments don’t have much of an effect on how you file your taxes.

Understanding child support tax considerations can help you avoid any surprises when you file your taxes. For more information about the tax implications of child support, talk to a child support law attorney.

Understanding Tax Implications of Child Support

Tax filings change a lot after a married couple separates. Divorced couples lose many of the tax benefits of marriage and may lose tax credits if the other parent gets primary custody. Divorce laws can vary by state, but most of the tax implications involve federal income taxes. However, parents must also consider how child support affects their state and local income taxes.

Understanding the tax implications of child support can help with your tax planning. Child custody arrangements can also change your tax implications. Tax laws continue to change every year. For the most up-to-date information on how child support affects your tax return filing, talk to a local family law attorney.

Non-Deductibility and Non-Taxability of Child Support

According to the Internal Revenue Service (IRS), child support is not taxable and not tax deductible. Child support is tax-neutral. The payor does not have to indicate in an IRS form how much they paid in child support. The receiving parent does not have to include child support payments in their gross income.

Child support payments are for the benefit of the child and to provide food, shelter, clothing, and their educational needs. Custodial parents do not get to deduct most costs of raising their child and that doesn’t change when the parents separate.

Child support receives tax treatment similar to alimony. Before 2019, alimony payments were tax deductible for the paying spouse. Spousal support payments were taxable for the receiving spouse. However, with limited exceptions, alimony is no longer tax deductible or taxable income.

Claiming Dependents and Tax Credits

Credits and deductions provide significant tax benefits to parents with a minor child. After divorce or separation, parents can still take advantage of child tax credits, but they cannot both take the credit for the same child.

Parents must decide who gets the child tax credit or how to share the credits. Parents can also agree to certain tax issues in their separation agreement. For example, separated parents can alternate claiming the child as a dependent in alternating tax years.

There are a few types of federal income tax credits and deductions for parents with children. Tax benefits for parents include:

• Child tax credit
• Child and dependent care credit
• Earned income credit (EITC)

The parent with custody of the child can sign a release to let the noncustodial parent claim the child as a dependent and get the child tax credit. However, the EITC is generally for the parent who the child lived with for more than half of the year.

Claiming the Child and Dependent Care Credit

The child and dependent care credit helps offset the high costs of childcare. The amount of the credit depends on the number of children and your income. You can claim the credit if you pay someone else to care for your child while you work or look for work. Keep track of your work-related expenses while your child is in childcare. You also have to identify the individuals or organizations providing childcare.

Tax Refund Interception for Unpaid Child Support

Federal law allows your federal tax refund to be intercepted for unpaid child support. If you have past-due support, the state child support agency can seize your tax refund to pay debts owed to the state and back child support payments.

Before losing your tax refund, the state will generally send a notice of your outstanding child support payments. You can pay off the arrears to avoid a tax interception. If you don’t make a payment or appeal the intercept, the IRS can redirect your tax refund to the state child support agency. They can also intercept state tax refunds and lottery winnings.

Navigating Related Tax Considerations

Ideally, you will be on good terms with your child’s other parent. When there are questions or changes that have tax purpose benefits, open communication can help both parents benefit. Before making changes to your child support orders, talk to a child support lawyer about the possible tax implications. Contact a local child support attorney for legal advice.