Tax Considerations Regarding Child Support

While no one can dispute that paying child support is a good and necessary responsibility of a parent, that doesn’t mean anyone particularly likes fighting for it or being ordered to pay it. For many separated parents, child support can be a source of tension and hostility. Whether you are paying or receiving child support, there are tax implications to consider.

Child Support is Not Tax Deductible

The first consideration is a common question with a simple answer. Can I deduct my child support payments on my tax return? The answer is a definitive “No.” Child support payments are not tax deductible for the parent paying child support. The next question is: If I receive child support, do I have to report it as income? Again, the answer is no. The IRS does not consider child support taxable income. In addition, receiving child support does not qualify as income under the earned income credit.

Child Support and a Child’s Dependent Status

If you pay child support, there is a possibility that you can claim the child as a dependent on your tax return. Generally, only the custodial parent of a child can claim the child as a dependent on their tax return. The custodial parent is considered the parent who has cared for the child for the majority of the calendar year.

However, there is an exception. If the custodial parent agrees and waives the exemption, the non-custodial parent (usually the one who pays child support) becomes eligible for the exemption. In order to facilitate this, the custodial parent must complete and sign IRS Form 8332, (Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent) that the non-custodial parent must then file it with their tax return

Delinquent Child Support Can Result in IRS Withholding

If you fail to pay child support, you may experience unexpected tax consequences. This is because child support arrearages can result in the IRS withholding a parent’s tax refund. The IRS and Treasury Department can withhold your entire refund to offset your outstanding child support obligation. This occurs when the state’s child support agency notifies the IRS or Treasury Department of your debt and requests the money from your tax refund.

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