Is child support considered income for tax purposes? Are the payments tax deductible? We answer those questions and more in this article.
When it comes to child support, questions about its tax implications often arise. Common areas of uncertainty about child support payments include:
Whether you're receiving or paying child support, understanding the tax implications is crucial for making informed decisions. This article will answer each of these critical questions so that parents can have clarity about the financial impact of child support payments on their tax returns.
No, child support payments are not taxable income for the recipient.
The IRS explains that persons receiving child support payments should not include that money when they calculate their gross income for their tax return.
What about for the paying spouse? Is child support tax deductible?
No, child support payments are not tax deductible for the person paying child support, either. It does not matter how many children a parent pays child support for, nor does it matter how much they pay in total child support payments. Regardless of the specifics, child support is not tax deductible.
Instead, child support is considered a "tax neutral" personal expense, meaning it does not count as income for the recipient and it is not deductible for the payor.
It's crucial to note that alimony, or spousal support, may be treated differently than child support for tax purposes.
So, child support is not tax deductible for the payor. But if you pay child support, does child support affect other tax benefits? For instance, can you claim the child as a dependent on your taxes? It depends.
Only one parent can claim a child for federal income taxes. Generally speaking, for divorced or unmarried parents, the custodial parent is the parent who can claim the child as a dependent. (The custodial parent is also the one who can typically claim the Child Tax Credit, though the IRS notes, "[p]arents and guardians with higher incomes may be eligible to claim a partial credit.")
Even if parents share joint custody, whoever the child spends more time with over the course of the year is considered the custodial parent, and the other parent is the non-custodial parent.
The non-custodial parent could still claim the child as a dependent in certain circumstances. They can do so, though, only if the custodial parent signs Form 8332: Release / Revocation of Release of Claim to Exemption for Child by Custodial Parent and releases the exemption.
Spousal support, commonly called alimony, may have different tax implications than child support depending on when the spousal support award was issued and depending on where you live.
The Tax Cuts and Jobs Act changed how federal taxes treat alimony payments. For alimony awards executed by December 31, 2018, alimony is taxable income for the recipient and tax deductible for the payor. For alimony awards executed or modified on January 1, 2019, or later, alimony payments are not taxable income for the receiving spouse and are not tax deductible for the paying spouse.
In other words, child support and spousal support have the same tax implications for support orders in the last five or so years but were treated differently prior to that time.
Additionally, note that some state tax laws do not mirror the federal tax rules for spousal support. Most do, but as an example, spousal support is taxable income (and tax deductible) under California law.
No, child support is not taxable income in California for the recipient, and payments are not deductible for the paying parent.
The tax treatment of child support payments in California is the same for state taxes and federal taxes. As discussed above, this differs from how spousal support (or alimony) is treated in California, as California's state laws differ from federal tax rules depending on when the alimony award was issued.
Child support is not tax deductible because there is an expectation that any parent financially support their child, and child support payments are made for that specific purpose. So whether you spend the money yourself or pay it to the other parent so they can spend it for the child's benefit, that money would go towards the child's welfare regardless and is considered a personal expense.
Yes, child support is tax neutral, but it is sometimes considered income for other purposes. For instance, when evaluating SNAP (formerly called food stamps) eligibility, child support is considered income. Additionally, unlike child support's tax treatment, a parent paying child support can deduct any legally obligated child support in the context of SNAP eligibility.
So, is child support taxable income? No, child support is not considered income for the receiving parent, and it is not deductible for the paying parent.
That said, although the top-line question is straightforward, there can be other financial consequences and implications to child custody and child support arrangements. If you want to better understand your options and eligibility for tax benefits, consider speaking with a family law attorney or tax professional today.
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