Parents who pay child support every month, or perhaps from each paycheck, wonder whether these payments are tax-deductible. Unfortunately, the answer from the Internal Revenue Service (IRS) is “Sorry, no.” Child support, whether your children live with you or you are paying it, is considered a personal expense. It cannot be deducted from taxes. However, non-custodial parenthood can come with one or two potential tax deductions. Here’s what you need to know about how child support affects your taxes.
Why isn’t child support deductible from taxes?
If you took your child to the mall to buy a new pair of shoes, that would not be tax-deductible. The IRS treats payments for child support the same way. The money is effectively used to purchase shoes (or something similar) regardless of whether you take your child to the mall or the other parent does.
Does the other parent need to report the money as income?
The other parent does not need to report child support as income either. Your child does not need to include it as income, similarly, they do not have to report their allowance to the IRS. The IRS clearly states that child support payments can never be deducted by the payer nor are they taxed to the recipient. Custodial parents do not need to include received child support payments in their total income for tax purposes, even if they claim the child as a dependent.
Application of tax law
Section 61(a) of the Internal Revenue Code states that gross income includes all income from any source unless otherwise stated. The IRS clarified in a statement issued in 2016 that “as provided” applies to payments related to “child support.”
How do alimony payments affect taxes
Section 61(a) of the tax code makes a clear distinction between child support and alimony because, unlike child support, alimony payments could be tax-deductible. The person paying alimony could deduct those payments from their taxable income, while the person receiving the payments had to include them in their gross income for tax purposes.
Deductions for medical expenses
Non-custodial parents are not entirely left without tax deductions regarding medical expenses they pay on behalf of their children. The IRS wants to offer a tax benefit when it comes to medical expenses paid on behalf of children.
You can claim a detailed deduction for your child’s medical expenses even if they do not live with you, provided you personally paid a health insurance company or healthcare provider, and your child lived with you or the other parent for at least half the year, and they are related to you, and both you and the other parent have paid more than half of their support during the relevant tax year.
Unfortunately, you must itemize this deduction, which means giving up the standard deduction for your tax status. This will only make sense if your total itemized deductions exceed the amount of the standard deduction you are entitled to claim for that tax year. You can only claim a deduction for medical expenses that exceed 7.5% of your adjusted gross income (AGI).
Other considerations
Tax considerations for children do not end here. The child tax credit is still in place and applicable. It goes up to $2,000 per qualifying child in the 2022 tax year for those earning up to $200,000.
You can
Parents who do not have custody can claim this dependency if they have the right to claim their child or children as dependents because the custodial parent has granted them this right by completing and signing IRS Form 8332. The qualifying rules apply to children of divorced, separated, or never-married parents.
Note that the non-custodial parent must submit Form 8332 with their tax return.
Delayed Child Support Payments
You cannot use child support payments to offset any taxes you owe, but your tax refunds can be withheld to offset any unpaid and overdue child support obligations. The Treasury Department will seize federal tax refunds from individuals who are behind on child support payments and send the money instead to the custodial parent who was entitled to receive that support.
Frequently Asked Questions
How does child support work?
Child support is a payment made by the non-custodial parent to the custodial parent. It is enforced by state and local governments to ensure that non-custodial parents fulfill their legal obligation to support their children. The procedures of each state agency vary slightly, but generally, you can enter into a child support agreement on your own initiative. If the custodial parent files a child support claim against you, the court will initiate proceedings to establish paternity, determine payment obligations, and set the terms of your payment agreement.
Who pays taxes on child support?
Child support payments are not deductible by the payer, nor are they taxable to the recipient. Any amount you pay in child support is already included as part of your income.
Source: https://www.thebalancemoney.com/is-child-support-tax-deductible-3193029
Leave a Reply