Child support falls into something of a black hole when it comes to taxes. It's tax-neutral, meaning that it is neither a deductible expense for the parent who pays it nor taxable income to the parent who receives it. In some states, the court takes into consideration a parent's tax burden when it calculates a support order, but that's the only common ground child support and taxes share.
Taxes Affect Child Support Calculations
Child support is income-driven and calculated on a parent's net or gross income. This varies by state, so check with a local lawyer or legal aid office where you live. If your state uses net, rather than gross income, to calculate child support, your payments would be typically less because they're based on a lower amount of income. Net income is what's left after taxes and some other allowable deductions, such as union dues that you must pay in order to work.
Child Support Is Non-Taxable Income
When you make a child support payment to your ex, you're not giving her the money for her own use. You're giving it to her to care for your child. This makes the payments a personal expense, and personal expenses aren't tax deductible. Because the money is for your child's care, your ex doesn't have to claim the money as income. Your child doesn't have to claim it, either, because the support is intended to meet his needs for food, shelter and clothing -- things he would have been entitled to if you hadn't broken up.
Who Gets the Dependency Exemption
Under IRS rules, the custodial parent -- the one receiving child support -- usually claims the child as a dependent for tax purposes. If you and your ex can't agree on who gets that tax exemption, the IRS will likely rule in her favor if your child spends more overnights with her during the year than he does with you. But she can voluntarily give you the dependency exemption, and under some circumstances, a family court might order her to do so. To give you the exemption, the custodial parent must sign Form 8332, which you file with your tax return. Claiming the dependency exemption lowers your taxable income.
Alimony Is Tax Deductible
If you're negotiating a marital settlement agreement with your spouse and you'll be paying both alimony and child support, consult with an attorney to make sure you get the wording of the agreement just right. The IRS treats alimony differently from child support -- it's tax deductible if you pay it and your ex must claim it as income when she receives it. If the wording of your agreement is ambiguous, the IRS can treat all your payments as child support. For example, if you agree to pay $750 a month in alimony and $500 in child support, but your agreement says something like you'll be paying your ex $1,250 a month in general support, you'll lose a $9,000 annual tax deduction for not clearly delineating each type of support. The IRS looks at whether the amount of your payments can go up or down as your income changes and whether your agreement says your payments end when your child reaches the age of majority. Such statements indicate the payments are actually non-deductible child support rather than alimony.
- IRS.gov: Topic 452 Alimony Paid
- IRS.gov: Dependents and Exemptions
- FindLaw: Child Support and Taxes Q&A
- Nolo: Child Support and Taxes
- DadsDivorce: Tax Tips: Can I Deduct Child Support?
- Illinois Child Support Services: Calculating Child Support Obligation
- Wisconsin Department of Children and Families: Income for Child Support