When couples divorce or separate, they must face the question of child support if they have minor children together. After the court has issued the order for this support to be paid, both parties then may wonder how this money will affect their income and their tax returns.
Depending on whether you pay or receive child support, this money could affect your income and returns in distinct ways. Before you file taxes, you should understand how the IRS views child support and whether or not you must claim it on your own tax return.
Qualifications of Child SupportAfter the court formally acknowledges your separation or divorce from your child's other parent, it will then issue an order for child support. It is essential that you have a family or divorce attorney representing you in your case so that you are guaranteed that the order mandates these payments be specifically designated as child support rather than family or spousal support.
Having these payments designated as child support helps you avoid having to declare the money as income if you are the parent who is receiving the payments each month. If it is included in your spousal support, you will be required to declare the money as income and could end up owing the IRS more money than you rightfully should.
If you are the person making the payments, you likewise should ensure that the money is designated as child support. While you can legally deduct alimony or spousal support as an expense against your income, you cannot deduct child support on your tax returns.
Child Support and Filing TaxesThe IRS does not recognize child support as a form of income. The money is intended to be used to feed, clothe, and otherwise care for your children and is legally required to be paid by the non-custodial parent until your children reach 18 years of age.
Because the IRS does not count child support as income, you are not required to declare it on your taxes. Alternatively, if you are the parent paying the child support, you cannot deduct it as an expense like you could spousal or family support.
Child Support and Claiming ExemptionsWhen you and your child's other parent go to court to separate or divorce, you both should have an attorney who is skilled in family or divorce law representing you. This representation is vital in particular if you want to claim your children as exemptions on your tax return each year.
In fact, the court typically will issue a decree mandating which parent can claim your children as exemptions. In most cases, the custodial parent is awarded this right. However, the non-custodial parent may be allowed to claim the children if:
- The court issues a decree stating that the non-custodial parent can include the children on his or her returns as exemptions
- The non-custodial parent pays at least $600 per year in child support
- The custodial parent states in writing that he or she gives permission to the other parent to claim the children as exemptions
- The non-custodial parent fills out and attaches IRS Form 8332 to his or her tax return proving that this person has met the criteria for including the children as dependents
You should note, however, that you and your children's other parent cannot both declare the children as dependents on your returns. Only one of you can legally do so each year. If you both attempt to claim them on your taxes, the IRS will flag your return, and you both could face fines or seizure of your refunds.
Unlike other forms of payments, child support cannot be declared as income on your tax returns. When you want to avoid problems with your taxes after a separation or divorce, you should understand how the IRS views these payments and make sure you have adequate legal tax representation when you go to family or divorce court.