Can I Write Off Child Support on Taxes?
Demystify the tax implications of child support payments. Gain clarity on how these affect your finances and other parental tax considerations.
Many parents navigating separation or divorce often wonder about the tax implications of child support payments. This article clarifies the tax treatment of child support for both payers and recipients, distinguishes it from other financial arrangements like alimony, and outlines additional tax benefits available to parents.
Tax Treatment of Child Support Payments
Child support payments are not tax-deductible for the parent making them. The Internal Revenue Service (IRS) considers these payments a personal expense, similar to other costs associated with raising a child. Parents cannot reduce their taxable income by the amount of child support they pay or claim it as a deduction on their federal income tax return. This tax-neutral treatment simplifies tax filing by eliminating complex calculations for payers.
Tax Treatment of Child Support Received
Child support payments received are not considered taxable income for the recipient. These funds are viewed as a transfer of money intended for the benefit and care of the child, rather than as personal income. This exclusion means receiving child support does not affect the recipient’s gross income for tax purposes. It also does not impact eligibility for income-based tax credits, such as the Child Tax Credit or the Earned Income Tax Credit.
Child Support Versus Alimony
Distinguishing between child support and alimony, also known as spousal support, is important due to their differing tax treatments. Child support is specifically for the child’s welfare, covering needs like housing, food, and education. Alimony, by contrast, aims to provide financial support to a former spouse.
For divorce or separation agreements executed before January 1, 2019, alimony payments were tax-deductible for the payer and considered taxable income for the recipient. However, the Tax Cuts and Jobs Act of 2017 (TCJA) changed the tax treatment of alimony for agreements executed on or after January 1, 2019. Under these newer agreements, alimony payments are neither deductible for the payer nor taxable for the recipient. This aligns the tax treatment of alimony with that of child support, which has always been non-deductible for the payer and non-taxable for the recipient.
Tax Benefits for Parents
Beyond the direct treatment of child support, parents may be eligible for other tax benefits. The Child Tax Credit allows eligible taxpayers to reduce their tax liability for each qualifying child. Generally, the custodial parent, the parent with whom the child lives most nights, claims the child as a dependent for tax purposes.
However, the custodial parent can agree to release their claim to the dependency exemption, allowing the noncustodial parent to claim the child for certain tax benefits. This transfer is formalized using IRS Form 8332, “Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent.” Without this form, the IRS will typically deny dependent-related tax benefits claimed by the noncustodial parent, even if a divorce decree states otherwise.
Parents with qualifying children may also be eligible for the Earned Income Tax Credit (EITC), a refundable credit for low to moderate-income taxpayers. The child must meet specific criteria to be a qualifying child for EITC purposes. The Child and Dependent Care Credit is another benefit available to parents who pay for the care of a qualifying child or dependent to enable them to work or look for work.