Is Child Support Taxable in Pennsylvania?

The rules for child support, set by the Internal Revenue Service (IRS) and state tax authorities, create a uniform approach to how these payments are handled. For parents in Pennsylvania, this framework affects the tax treatment for both the parent receiving and the parent paying support, and it also relates to claiming a child as a dependent.

Tax Treatment for the Recipient Parent

Child support payments are not considered taxable income. This principle applies at both the federal level, as dictated by the IRS, and for Pennsylvania state income tax purposes. Consequently, a parent receiving these funds does not need to report them as income on their federal Form 1040 or the Pennsylvania PA-40 tax return.

The reasoning behind this treatment is that child support is not viewed as earnings or profit for the recipient parent. Instead, the tax code treats these payments as funds transferred for the direct welfare and needs of the child to fulfill a parental support obligation.

This distinction is important when payments are combined with spousal support or alimony. Unlike child support, alimony payments made under agreements executed before January 1, 2019, are often taxable to the recipient. A support order that clearly designates the specific amounts for child support is necessary for accurate tax filing.

Tax Treatment for the Paying Parent

Child support payments are not tax-deductible for the paying parent. This rule is consistent for both federal and Pennsylvania state tax filings. The money paid cannot be used to lower the paying parent’s total taxable income for the year.

The logic applied by tax authorities is that these payments are a personal family expense. They are not considered a business expense or a type of deductible expenditure but rather a financial obligation to one’s child, treated similarly to the everyday costs a parent would incur if they were living with the child.

It is important not to confuse the tax treatment of child support with that of alimony. For divorce or separation agreements executed after December 31, 2018, alimony payments are also not deductible by the payer. However, because the rules for older alimony agreements differ, parents should be careful to distinguish between the two types of support.

Claiming the Child as a Dependent

The issue of which parent can claim the child as a dependent is separate from the taxability of support payments. The general rule from the IRS is that the custodial parent—defined as the parent with whom the child lived for more than half the year—is the one entitled to claim the child. This is determined by counting the number of nights the child stayed with each parent; if the count is equal, the parent with the higher adjusted gross income (AGI) typically claims the dependent.

An exception to this rule exists. The custodial parent can allow the non-custodial parent to claim the child by signing IRS Form 8332, “Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent.” The non-custodial parent must then attach this signed form to their tax return for each year they claim the child.

Claiming a child as a dependent allows the parent to access various tax benefits, most notably the Child Tax Credit. However, even with a signed Form 8332, certain benefits cannot be transferred. The right to file as Head of Household, the Earned Income Credit, and the credit for child and dependent care expenses remain with the custodial parent.