Whether you’re recently divorced or have a longstanding child support agreement, when tax season arrives in January, you might have questions about how to report or claim child support payments.
Child support is considered tax-neutral and isn’t taxed by the IRS. “Child support payments are not considered taxable income for the recipient, nor are they deductible for the payer,” said Chris Rivera, CPA and founder at The Ecommerce Accountants.
However, there are some related tax breaks and rules about claiming dependents to keep in mind. Here’s everything you need to about child support ahead of tax season.
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Is child support taxable income?
No, the IRS guidelines confirm that the child support you receive is not taxed as income. If you pay child support, you cannot claim your payments to get a tax break either.
Child support is designed to pay for the ongoing expenses of raising children and is typically based on the number of overnight stays with each parent as well as each parent’s income. If two parents have 50/50 custody of their children, the parent with the higher income usually pays child support to the other parent (state laws may vary).
What about alimony?
While child support is not tax-deductible or considered part of a household’s gross income, your alimony payments might be. The Tax Cuts and Jobs Act of 2017 changed the taxability of alimony payments, starting in 2019. Any alimony agreements made after 2019 are not tax-deductible or considered gross income, so they don’t need to be claimed or reported by either the payer or the recipient.
Alimony agreements made prior to 2019 are still tax-deductible and should be reported and claimed.
If you renegotiate a divorce agreement made before 2019, the new rules will apply unless you expressly note that the payments should be taxable, said Kristin Lis, a family law attorney at Netsquire. “If it’s not said, then it automatically converts over to being not taxable anymore.”
How do I report child support payments I received on my tax return?
Child support payments are not included in gross income, so if you’re receiving child support from an ex-partner or the other parent of your children, you won’t report it on your tax return.
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How do I report child support payments I made on my tax return?
Paying child support is not a tax-deductible expense, so you should not report child support payments when filing your tax return.
Is there a child support deduction?
No, there is not a child support deduction for parents who are paying child support. Since the IRS considers child support a payment for a child’s expenses, you cannot claim a tax deduction or credit for this expense.
However, if you’re eligible to claim your child as a dependent, you may be eligible for certain tax breaks. For example, there is a child tax credit that parents can claim for each qualifying child who lives with them for more than half the year, is under 17 at the end of the year and who doesn’t provide at least half of their own financial support.
You may also be eligible to claim other credits such as the dependent care tax credit.
Who is the custodial parent?
When parents are splitting custody 50/50, the custodial parent is the one earning a higher adjusted gross income or AGI. Parents can also take turns claiming the credit. The easiest way to do this is to have the custodial parent sign IRS tax form 8332, which releases them from claiming the child tax credit that year, and allows the noncustodial parent to claim it.
Lis strongly recommended that parents detail the child tax deduction in the divorce agreement and use Form 8332.
If I owe child support, can the IRS take my tax return?
Yes. Although child support is not tax-deductible or considered taxable income, if you owe child support to the other parent of your children, then your tax return might be used to cover what’s owed.
“If you have unpaid child support obligations, the IRS can intercept your federal tax refund to cover the arrears,” noted Rivera. “This is done through the Treasury Offset Program, which allows the IRS to offset your tax refund to pay for certain debts, including child support.”
What else should I know about child support?
Child support is not intended to cover all of a child’s expenses. There are also other shared expenses that are not considered part of child support, such as medical expenses or athletic footwear in New Jersey, where Lis practices.
“If your kid is a dancer, tap dancer, football player, track and field — you’re not expected to get the cleats and the track shoes and the tap dance shoes using your child support,” Lis explained. “Those things also get shared between parents.”
Another exception might be insuring teen drivers. “If you have one teen driver, your insurance policy practically triples,” Lis said. “Knowing that the one who’s the primary custodial parent is not going to be the one dinged for the insurance, it becomes much more equitable to have that responsibility shared.”
