How Does Child Support Affect My Taxes?

Taxes can get complicated when you split up with your child's other parent. In nearly all cases, one of you will have to pay child support. And whether you are the parent paying or receiving support, it's important to understand how the IRS treats these payments and which parent gets to claim the child as a dependent. Here are answers to some common tax-related child support questions.

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 how much. Formulas vary from state to state, but most states consider each parent's income, the number of overnights each parent has with the child, and child care and medical expenses.

Noncustodial parents usually pay the custodial parent child support to help with day-to-day living costs, extracurricular activities, groceries, and other necessities.

Is Child Support Taxable Income?

The IRS doesn't consider child support to be taxable income. So, if you receive child support payments, you don't need to include the payments as income on your federal tax return.

Similarly, the IRS doesn't allow parents who pay support to deduct child support payments from income on their federal tax returns.

Which Parent Gets to Claim the Child as a Dependent?

According to the IRS, the custodial parent typically has the right to claim a qualifying child as a dependent on their tax return. The IRS defines the custodial parent as the parent who lives with the child for more than half the nights each year.

If parents split time with the child equally, under IRS rules, the parent with the higher adjusted gross income (AGI) is considered the custodial parent.

You and your co-parent can deviate from this rule if you want. Either parent can claim the child as a dependent if the custodial parent signs a written release of the claim for that year (Form 8332). Some parents, for example, like to take turns claiming the child as a dependent.

Can the IRS Take My Tax Refund If I Owe Child Support?

Each state has an office of child support services that helps parents establish and enforce child support orders. If you fall behind on your child support payments, the IRS can intercept your federal tax refund and send it to the other parent through the child support agency.

Help With Child Support and Taxes

If you have questions about tax rules for child support, talk to an experienced tax professional, family law attorney, or preferably both. A professional in this area can explain how the rules apply to your situation and how to structure child support payments to benefit you and your child as much as possible.