Child Support and Taxes

What Is Child Support?

The law is clear that every parent must financially support their children, regardless of each parent’s involvement in the child’s life. Most states use a calculator to determine which parent will pay child support and what the monthly amount will be. Typically, the court will evaluate each parent’s income, overnights with the child, daycare or medical costs, and other qualified expenses.

Noncustodial parents usually pay the custodial parent child support to help with the costs of day-to-day living, extracurricular activities, groceries, and other necessities for the children. It’s important to remember that noncustodial parents may not dictate what the custodial parent does with the payments each month.

To qualify as child support for tax purposes, your judgment of divorce or custody order must designate the funds as “child support.” You might wonder, “why does it matter how we designate support if it’s not tax deductible?” If your order lumps your child support payments with alimony and calls it “family support,” or designates it as spousal support, your spouse must claim the payments as income for tax purposes, and the payor will get a tax deduction for any amount paid. After December 31, 2018, however, the new tax law will kick in, and neither spouse may report spousal support as a deduction or income.

Claiming the Child as a Dependent

Another common question is which parent gets to claim the child as a dependent for the tax year. As you know, children come with many expenses, but during tax time, you may also qualify for the child tax credit, which could result in a refund.

Generally, for a parent to claim the child as a dependent, the child must be under 17 at the end of the tax year, have lived with you for the last six months of the tax year, and you must provide at least 50% of the child’s financial support. If you’re still married and living together, claiming the child for tax purposes is usually clear-cut.

However, if you’re divorced, only one parent can claim the child as a dependent. The Internal Revenue Service (IRS) will cross-reference the child’s social security number before it processes either parents' tax return, and if both parents claim the child, the parent who files last will usually need to resubmit the tax form without the dependent exemption.

Special Rules

As noted above, for either parent to claim the child as a dependent, the child must live with you for the last six months of the tax year. For obvious reasons, noncustodial parents may find it difficult to claim the deduction, particularly when the child primarily lives with a custodial parent.

Typically your court order will specify whether one or both parents will take the credit. In cases where both parents are providing equal support, the standard is to have one parent claim the child in odd years and the other in even years. However, for a noncustodial parent to take the deduction, the custodial parent must sign a release form with the IRS and the noncustodial parent must attach it to the tax refund. The IRS uses form 8332, titled Release/ Revocation of Release of Claim to Exemption for Child by Custodial Parent, and you can find it on the IRS’s website.

If you finalized your support or custody order before 2008 (but after 1985), and your agreement states that the non-custodial parent can claim the exemption and the custodial parent will not, the noncustodial parent doesn’t need to send in form 8332.

Unmarried Parents or Parents Still Living Together

If you and your partner were never married, or if you lived in the same home for the last six months of the tax year, the test for determining which parent can claim the child is to identify the parent who provided more than 50% of the child’s support for the tax year. This test also applies if you don’t have a written document that has direction on which parent can take the credit.

Can I Deduct Any Child-Related Expenses?

Yes. Parents who pay for childcare, healthcare, and college costs, may be able to deduct these expenses on their tax return. Childcare, medical, and educational costs throughout the United States are high, and the prices continue to rise. The IRS deductions are only available to families that meet a certain financial threshold, and the credit won’t cover all of your expenses, but qualifying families may see a little relief at the end of the year.

Past-Due Child Support and Taxes

If you fall behind on your child support payments, the IRS can redirect your federal tax refund to the state agency that handles your support case, and it will then be sent to the custodial parent.

If you’re going through a divorce or custody case, and have child support or tax questions, you should speak to an experienced family law attorney in your area.