Is Child Support Taxable or Tax-Deductible?

Child Support Taxable or Tax-DeductibleChild support is neither taxable nor tax-deductible. The parent who pays child support can’t claim a deduction and the parent receiving the child support does not have to pay taxes on the income. Be sure to check your divorce or separation agreement as the money must be classified as child support and not family support or alimony, as they have different rules.

What about the tax credit for claiming the child as a dependent?

For the most part, the custodial parent (the one who spends the most time with the child) will be the one who can claim this tax credit, even if the other parent provided more than 50% of the child’s financial support for the year. Only one parent may claim the dependent exemption on their taxes, so make sure you know the rules and have a plan. There are exceptions to the general rule.   A separation agreement or a consent order can say that the custodial parent to waives the right to claim the dependent exemption. IRS Form 8332 also provides a way for the custodial parent to give up the right to claim the dependent exemption. In this case, the non-custodial parent must attach the form every year that the exemption is claimed.

One final note, federal tax funds can be confiscated and used to pay for overdue child support.

If you have questions about child support the Palmé Law Firm can help! Call 919-803-4512 or contact us here.