Child support and taxes

Child support is often a significant expense, and it is important for all parents involved to understand the impact of child support on their finances.

Tax neutral

According to the IRS, child support is not taxable to the recipient spouse. These payments are tax neutral personal expenses which do not require the payment of federal income taxes. Child support payments are not listed as income on a federal tax return and is not calculated as part of the recipient parent’s gross income.

Deductions

Under federal law, the IRS does not allow deductions for child support because it is a personal expense. Although this does not impact the spouse receiving child support, the payer is taxed for the money that makes support payments.

But payers may be eligible for the child and dependent care tax credit and the child tax credit. But this requires the payer to file as head of household.

You can qualify for this filing status by claiming your child as your dependent on your return. Payers are eligible for this status if they lived with child for over half of the year. Also, the couple must be divorced or legally separated, the spouses had to live apart during the last six months of the year and the spouses must file separate returns.

Planning for dependents

Only one parent can claim a dependent on their federal tax return. The parent who first files their return usually obtains the advantages of claiming their child as a dependent. In addition to the child tax credit, filing as head of the household has other advantages such a lower tax rate and a higher standard deduction.

In addition to taxes, child support involves other financial and personal issues. An attorney can help provide options for support and help pursue a fair and reasonable support order.

Lehnhardt Price, PLLC is not a certified public accounting firm.  You should always consult a tax advisor regarding these issues.